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Are Credit Cards an Alternative Source of Income?

Harry November 8, 2024

Why would a bank withdraw $15,000 from a customer’s account without any explanation or opportunity for the customer to stop the action?

That’s the question my friend asked himself after receiving a distressing phone call from his son, a successful entrepreneur. What happens next highlights the danger of placing too much trust in anything. credit.

A cautionary tale

My friend’s son has started many successful businesses and worked in a variety of fields, but as an entrepreneur his income can be cyclical, sporadic, and sometimes variable. He’d called in a rare panic, blurting out information he wouldn’t normally share so freely and confessing that $15,000 had been stolen from one of his accounts.

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My friend is nothing but a very protective mama bear; He wasn’t necessarily involved in his son’s adventures, but he began to worry because his son rarely shared such information with him. He wanted to know what was going on and ended up thoughtfully sharing the story.

As it turns out, even though he used all his power to the fullest, credit cards He had made a plan to go to Europe while he was between business ventures and said he kept $15,000 in an account that was now depleted.

When my friend asked how this money was stolen, he said that this money was taken directly from his account without any warning or explanation.

He asked if the bank applied this to credit card debt.

He said this was not possible because his credit card debt was from a different bank.

He wondered if there was any documentation proving that the bank had taken the money without his permission. If so, he can request that it be refunded to his account.

He continued to ask questions until I pointed out which account and bank the money had disappeared from. The answer surprised her because she didn’t even know he had accounts at that bank.

He dug deeper and soon discovered that it wasn’t. Negative You have a checking or savings account at that bank.

But he I did You have a credit card. And this card had $15,000 in available credit; This was the money he had “saved” for his trip.

What happened wasn’t that the bank stole his money. When all your other cards’ limits are reached, credit score It had fallen, so the bank lowered the credit limit. It wasn’t his money and it wasn’t stolen; It had never belonged to him anyway.

No, he insisted. HE it was his money. He was saving the loan as his only source of income.

So what is income?

The loan does not offer savings opportunities

Income is often defined by its function: to enable consumption and provide savings opportunities.

I have always maintained that credit cards are not an alternative source of income.

While having credit on a credit card provides a way to ensure our consumption, it does not offer us the opportunity to save. In fact, most of the time it’s the opposite.

Loan under certain conditions to be Offer us a way to use our money. If we use our credit cards to shop, we have a clean and easy paper trail of what we bought and when we bought it. Credit cards also offer many advantages as incentives compared to other payment methods.

Kiplinger Advisor Collective is the leading, criteria-based professional organization for personal finance advisors, managers and executives. Learn more >

How can you use credit cards to your advantage?

However, there are only two ways to use credit cards to your advantage:

If you pay off your card in full before the end of the billing cycle each month, you’ll receive your rewards and incentives. It may be easier to pay a monthly bill rather than account for every single expense.
Often, credit cards offer promotional offers of no interest or no fees for purchases within a certain period of time if you pay the minimum monthly payments.

Both options are available but you must fully understand the specific terms and conditions. Once you exceed these parameters, interest, fees, and penalties become costly because interest is constantly calculated and compounded. Payment of the total amount does not eliminate average daily balance calculations; therefore it may take several months for your account to clear at no additional cost.

Credit is not income

It’s a mistake to think, as my friend’s son does, that having credit means you have another source of income. Income is earned a) in exchange for labor or services, b) from the sale of goods or property, or c) as profit. invest.

Credit is not income.

Just because you have credit doesn’t mean you have the income to pay off your debt. debtAnd just because the bank lowers your limit does not mean that it is stealing from you.

Credit cards are not an alternative source of income.

The information provided here is not investment, tax or financial advice. You should consult a licensed professional for advice regarding your specific situation.

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Pasteleria-edelweiss

Are Credit Cards an Alternative Source of Income?

A cautionary tale

Harry

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Are Credit Cards an Alternative Source of Income?

A cautionary tale

Harry

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