24 Signs That You Could be in Financial Trouble #16: Using Your Credit Card to Pay for Necessities Because You Don’t Have the Cash

In this series I am covering the 24 tell-tale signs that you could be in financial trouble. Over the next few weeks I will be presenting these signs, how to identify them and tips on how to address the issue.

One sure way to find yourself in a dangerous financial situation is to pay for necessities such as utility bills and groceries with a credit card or cash advance because you don’t have the cash on hand. This becomes especially troublesome with the ease of getting a cash advance on your card. It may seem like a handy feature that you intend to pay off once you have the money but all too often that doesn’t happen. Then the cash advance interest rates can be substantially higher than a regular charge.

Slippery Slope

Using credit for necessities is a slippery slope. Your basic requirements in life such as food, water, housing and the like should be paid for by money provided though your income. If your income cannot support these basics you either have a significant spending problem or a lack of sufficient income.

If the money isn’t available to pay for groceries how does buying them on credit help? It can put food on the table for the time being but you still do not have cash. On top of that you have now just increased your credit card balance, the amount of interest that will be charged and the minimum payment amount. As you can see this is not a long-term solution. Using credit only further compounds the lack of money and puts you in an even worse financial situation.

What Can You Do?

If you are in a situation where you need to use credit to pay some basic bills it is time to seriously look at your situation. Is your spending under control and you feel like you don’t have enough income? If so it is time to see if you are living above your means. This could mean your rent is too high, you might have expensive optional utilities or even own a home when you probably can’t afford it. Whatever the reason you need to make a decision: earn more income or change your lifestyle to match your current income.

On the other hand maybe it is substantial debt or simply out of control spending that is forcing you to use credit to pay the bills. In this situation it is time to take a look at tracking expenses and creating a budget. Increasing income may help but it does not solve the problem of excess expenses.

There are an infinite number of reasons why we fall short with our money and the only way to address them are to realize what the problem is and work towards improving the situation. Using credit to pay your basic bills will only help you in the very short-term and long-term it is just a compounding problem. Without addressing the reasons why you’re in that situation will ultimately snowball out of control.

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Filed Under: 24 Signs of Financial Trouble

About the Author: Jeremy Vohwinkle is a Chartered Retirement Planning Counselor® and spent a few years working as a financial planner. Today, he helps people make the most of their money by writing about personal finance here and elsewhere on the web. Jeremy is also Coach at Adaptu and a regular contributor for other publications such as Intuit, and American Express. Be sure to follow Jeremy on Twitter or Google+.

3 comments
Jeremy
Jeremy

Well that was exactly my point in the post. Doing this is really only a temporary band-aid. Like you said, it just moves the problem into the future. Yes, there are possibilities that income can increase and it won't be a bad decision, but as you mentioned, not all that likely.

Moneymonk
Moneymonk

This should be #1. It has become so easy to charge that people easily forget they don't have cash. Once a person has a credit card, they never FEEL broke. They look at a credit card as an extension of their income. " after I pay my bills, I will have no money left over for food--that's okay, I forgot I can always use my credit card" No if you don't have cash left, cut down your expenses, you are way over your head.

It's like minimun wage said you are just pushing the problem in the future, either way, you have the same problem

Minimum Wage
Minimum Wage

How does buying them on credit help? It buys time and shifts the problem into the future when you MIGHT have more income. (Not likely, but possible. At least you have kept the wolf away from the door today.)

I earn minimum wage and have a dead-end job and no marketable skills. I also have student loan debt. I could be wrong, but I don't think my spending is out of control.

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