Standard personal finance advice is to use credit cards responsibly and pay off your balances in full every month. Some go so far as to say that we should stay away from credit cards altogether.
But like most things in life, nothing is black and white. There are a lot of grey areas that blur the lines between responsible and reckless, cautious and crazy — areas where we may not be doing the “right thing”, but we’re doing the best we can.
One such scenario is living on credit cards. In an ideal world, living on credit cards wouldn’t be an option. But in this imperfect world, when is living on credit cards the right thing to do?
To Avoid Homelessness
Let’s say you come across hard times — you lose your job or get in an accident and your whole financial world is turned upside down. In this case, an emergency fund would come in handy, but even then, what if it wasn’t enough? And what if you needed extra help, yet couldn’t work?
In some cases, you may have the option of moving back home with your parents or staying with friends for a bit. But depending on your situation, doing those things are either really inconvenient for you or them, or just simply not possible. If you don’t have the funds to pay rent, and risk being homeless otherwise, use your card to get by until you can find a cheaper place or until you get back on your feet.
Feed the Family
Another case where living on credit cards might be the right thing to do, is if it means feeding your family or going hungry. My first suggestion aside from using credit cards would be to apply for government assistance or food stamps, to help survive a financial rough patch. However, depending on your income, and your situation, you may not be eligible for assistance. If you are not eligible, and have a family to feed and do not have the funds, then use your credit cards to ensure there is food on the table.
Dealing with a Cash Flow Issue
There are certain times in life when your cash flow doesn’t work well with other deadlines in life such as rent, bills, etc. For example, if you are self-employed, you can go weeks without a check. In that case, you know the money is coming, but you may not have it when your bills are due. Also, many of us have dealt with the long drag of waiting to get paid when first starting a new job. It always feels like it takes a full month to get paid. In situations like this, it may be a good option to use your cards to cover your bills and pay them on time, and then pay your credit card balances in full as soon as you get paid.
I do believe that living on credit cards should be your absolute last option — but if they are your last option, it might be a nice option to have. In no way am I condoning being in debt, but if credit cards can help with immediate needs like housing and food in times of need, I think that’s a good thing.
If you find yourself in this situation, strive to pay off your credit card balances as soon as possible. Interest adds up quickly and can cripple your financial life. Once you are back on your feet, start saving up for a rainy day — a large enough emergency fund can help avoid many of these situations. It may take a while to build, but even if you only save 1% of your paycheck, you can start building a buffer that will help you avoid relying on credit cards when times get tough.
What situations do you think it’s okay to live on credit cards?