Using Credit Cards to Manage Cash Flow Crunches
I almost always follow the responsible wisdom offered in those “how to use credit cards” guides about paying your balance in full and on time every month to avoid interest charges. But being self-employed for a decade, and then launching my own business, I inevitably faced cash flow crunches.
For several years, it was a stressful scramble to meet expenses for the first few months of the year. Then, one January, I realized that the credit limits on my two main credit cards were plenty high enough to cushion a couple of months’ worth of expenses. By paying less on my monthly credit card bill, I could use the leftover money to cover other monthly expenses. Later, when the income started flowing, I paid extra on the credit cards until I caught up.
It’s important to note this approach cost a few hundred dollars in interest, however, at the time, I appreciated the peace of mind and the smoothing out of that cash flow crunch. It’s still recommended to pay your monthly credit card bill in full, but in this instance credit cards afforded me the financial flexibility to choose an approach to day-to-day finances that allowed me to better enjoy life.