Using Plastic is Killing Your Financial Health

by Bill on January 3, 2014

file0001578443946If you think using credit cards adds to your financial well-being, think again. Here are five signs that using the plastic may be killing your financial health.

Are Your Personal Finances Dependent on Minimum Payments?

At one point in time I used to hate getting mail in the middle of the month. That’s usually when the credit card statements show up. You all know the scene; you spot the long envelope with the plastic window on the front, your name and address glaring at you through it. A feeling of dread shows up as you open the credit card bill; mainly because one of two scenarios occurs.

Make monthly payments to keep the creditors at bay – this one I’ve seen all to often. You kind of glance at the minimum payment due and then sigh when it’s not too high. This means you can keep paying on the card while paying for living expenses as well. What you don’t want to think about is the amount of interest you are paying to keep this game going.

Taking cash advances to live – this is like paying the bank to allow you to have the bare necessities of living. You pay the minimum amounts due to keep the available cash limit afloat, and then spend it the following month to support purchases like food, gas and maybe even rent. Again, you are paying interest payments on borrowed money. You are, in effect, being supported by a bank and paying them for the service.

Debating between minimum payments and living expenses – if you wait until you find out what the payment on your credit card bill is before paying utilities or figuring if you need dog food, you are playing Russian roulette. One of these days you won’t have the money to do both and a payment will be missed; do that often enough and something gets cut off. I’ve had that with phones, cards, cable, and other items.

Credit Cards, Stress, and a Hamster Wheel

Too many bills and no money – this happens when you calculate all the monthly minimum payments and still don’t have enough. Yep, been there too. You start thinking ‘okay, if I pay this, this and this, I can let this and this go and skip that that this next month’; it’s called robbing Peter to pay Paul. It also doesn’t work for very long.

Friends and family are not banks – although they may think they’ve become such if you continuously ask them for cash to get you through to the next month. Yes, most likely you can pay them back at the beginning of the month; but I’ll bet you end up borrowing more money before the month is out again. This cycle causes you to keep running in circles with no way to slow down or get off. On top of that, friends and family may get tired of the cycle and quit being banks at any given time.

If you see yourself in any one of the above situations, as Jeff Foxworthy says “Here’s Your Sign”. You are in trouble and the plastic is killing your financial health.

The first thing you need to do, as of now – no, not tomorrow, now, is put the plastic away and stop using it for awhile. Then get some help via a credit counselor.

Any other suggestions? If a credit counselor is out there, chime in.

William Swan, writer

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{ 2 comments }

Daisy @ Prairie Eco Thrifter January 6, 2014 at 2:23 pm

I always, always use plastic, but then I pay off my balance at the end of the month (then I reap the rewards with free flights, etc). Being in credit card debt would be SO stressful. It’s high interest, and very hard to get out of.
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Bill January 7, 2014 at 3:15 am

Now see for someone like you, the reward miles on a credit card would be worth it; especially if you pay off the balance each month.

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