Credit cards are becoming an integral part of the modern financial landscape. The popularity of credit cards is that they’re convenient and flexible. But despite that, a surprising number of people rely on credit cards for emergencies. Namely, credit cards allow us to borrow and bridge the gap between paychecks.
That’s why people ask whether living off credit cards is possible. But despite the overwhelmingly one-sided answer, which we’ll get into, there’s another side to credit cards that most people aren’t fully aware of. This guide will answer whether living off credit cards is possible. In addition, we will dive deeper and look at potential methods pointing out that living off credit cards is indeed possible.
Living Off Credit Cards – Is It Possible?
Asking whether living off credit cards is possible will likely give you a “no” answer. But the truth depends on several factors. First and foremost, it depends on an individual’s circumstances. Secondly, it depends on your credit card usage habits. But most importantly, it depends on your credit card debt management skills.
The biggest appeal to credit cards is short-term relief during emergencies. Namely, credit cards allow us to borrow in advance to pay for emergencies and then repay, usually with considerable interest. While short-term relief is one way to live off credit cards, it’s not entirely possible or recommended for long-term sustenance.
Living off credit cards entirely can lead to financial pitfalls because of the high annual percentage rates (APR) if you misuse your credit cards. The high rates are typical for all credit card issuers and are in the low to mid 20%. Moreover, the APR quickly adds up and results in high debt accumulation. But that’s not all. Credit card companies may impose fees and late-repayment penalties if you don’t repay or exceed your credit limit. Being in credit debt and paying fees on top of the debt only exacerbates the financial burden.
These issues ultimately lead to financial instability, making living off credit cards entirely unfeasible and unsustainable.
Despite all that, living off credit cards is indeed possible. But before we tell you that, you must understand how credit cards work.
How do Credit Cards Work?
For the purpose of this article, you must know three things about credit cards before ever making a purchase. Those are:
- Your credit card has an open statement date.
- Your credit card has a close statement date.
- Your credit card has a payment due date, usually on a specific date following the close statement date.
To further explain, here is an example. Let’s say you purchased a brand-new suit on the 20th of July, which is also the open statement date. The close statement date is on the 19th of August and the payment due date is on the 15th of September, which is the following month. That means you have until the 15th of September to repay the amount without accumulating any interest.
Now, let’s look at how using credit cards correctly can help you live off them.
How To Live Off Credit Cards the RIGHT Way
Despite the negativity surrounding credit cards and especially maxing your credit limit, living off them is possible. Here are a few examples of how:
Example 1: Leverage the Repayment Due Date
Since we now know how credit cards work, we can leverage the gap between making the purchase and the payment due date to make purchases free of charge. To summarize the previous point:
You must pay off your purchase before the payment due date; otherwise, your credit card company will impose interest.
Another thing to know is that plenty of credit card companies offer a 0% introductory interest rate for X amount of time (X is usually a number of months). So, for example, X could be six months, twelve months, or sixteen months. That gives you plenty of time to max your credit card balance and use it to live free of charge or even make money. For example, you can max your credit card and invest the money before the 0% introductory interest date ends to make money before repaying with no interest. Popular examples include investing in stocks, flipping condos, or investing in a business.
This is one way people live off credit cards. But your credit card company won’t offer a 0% introductory interest rate for the entire time you own the credit card. So, as we mentioned at the beginning, living off credit cards is possible in the short term.
Example 2: Leverage Potential Sign-Up Bonuses
Many credit card companies offer cash bonuses in the form of sign-up bonuses. However, they won’t give you the money straight away. Instead, they will provide you with, for example, a $300 cash bonus if you spend $600 in the first three months.
So if you spend $600 in the first three months since acquiring the new credit card, you will make $300. It’s worth mentioning that some credit card companies require you to repay the $600 before they give you the cash bonus.
Example 3: Leverage Cashback or Reward Points
Many credit card companies provide cashback bonuses or reward points for spending money with their credit card. It’s worth mentioning that these rewards are tiny percentages, but it does mean you’re getting something in return. In other words, credit card companies will pay you to use their credit cards.
If you pair the cashback/reward points scheme with the first example, you could make money back for free (before the credit card company charges interest).
Example 4: Leverage Your Credit Score
Living off credit cards is possible so long as you use them correctly. If you use your credit cards correctly, your credit card issuer will give you a better credit score. This means your credit card company will give you better interest rates on mortgage loans, car loans, consumer credit, etc. A higher credit score makes you more creditworthy. That means you’ll be able to increase your credit limit. So you can do everything in the previous examples but on a larger scale.
Example 5: Leverage Balance Transfers
Many credit card companies offer balance transfer services that allow you to transfer the balance from your old (already existing) credit card to a new one. What’s interesting about balance transfers is that you can “hack” your way into a new credit card with, for example, a 0% introductory interest rate for sixteen months. So if the 0% introductory interest rate has passed on your old credit card, you can transfer the balance to a credit card with sixteen months to pay the money off at zero interest.
But before you do that, it’s worth mentioning that credit card companies will charge you a transfer fee, anywhere between 1% to 5% depending on the credit card company.
Living off credit cards is risky. The high APYs and potential fees and penalties are more than discouraging. But through proper credit card usage, there are ways to live off credit cards. Although, it takes extreme discipline and financial management to do it right. Regardless, we’ve given you five examples of how living off credit cards is possible.
Yes, you can. However, living off credit cards is very risky and requires financial discipline and management skills. Furthermore, living off credit cards is possible in the short term but highly difficult in the long term.
Living on credit cards isn’t better or worse compared to other methods. If you try to live off credit cards, you must educate yourself on how to do it correctly. Otherwise, you’re risking accumulating high credit card debt and financial ruin.
The number one rule of using cards is to pay your bills on time and never be late for payments.