What Not to Do: Think of Credit as Free Money

February 6, 2012

What Not to Do is a series based on the numerous mistakes that I have made in my life. I am not a financial adviser, I can’t tell you want to do but I can tell you what NOT to do. I hope you will use this series of posts to help educate those you love about the dangers of debt can affect your life. Use the trouble that I have gotten into as a springboard for your own discussions, please.

Lessons in What Not to Do with your Finances


From the first day that I got my very first credit card, I thought of it as free money. I knew that I had to pay it back but with a $10 minimum payment, I knew that I’d have plenty of time to worry about it.

When I was issued a new credit card, it felt like I was just gifted an inheritance. That empty credit card felt like an adventure that was just waiting to begin. The $3,000, $5,000 or more available to me was just waiting to be used for something amazing.

Each time my credit limit was raised, I was able to breathe for a few more months. I could “afford” to put gas in my car, buy groceries, etc. without having to worry about where the money was going to be coming from.

I was completely clueless about the harm these actions were going to cause me later on.

Looking back on it now, I don’t understand how I could have been that ignorant.

What was I thinking?

Looking back now I find my actions completely ridiculous. I can not believe that I didn’t think about the future. I can not believe that it never occurred to me that I shouldn’t buy things if I didn’t have money in my checking account.

I know I’m not alone in thinking this way. I’ve talked to a number of people who have done something similar. I watched a friend go through this when she refinanced her home. She took rolled the equity back into the loan and took the cash. The money was not invested or put into a savings account. It was not reinvested in her home either.

The equity in her home went to pay off credit card debt and a vacation. The credit cards were later charged back up. She took a wise investment (her home) and turned it into a liability by owing 100% of its value. She also had a great deal of credit card debt and no savings account.

I’m, for the most part, in the same position as she was but I’ve never owned a home.

The Lesson

Credit cards are not free money! They are a loan from a bank who hopes you will take years to pay it back.

Credit cards are not a means to an end, unless the end you seek involves massive debt.

I made enough mistakes with credit to last a lifetime. I really hope you will remember this and any of the other stories I share when you are talking to others about finances. My goal has always been for others to see all the mistakes I’ve made and remember them so they avoid making them. I do not want a young adult to go out on their own without a firm grasp on using money effectively.

I also blog at A Five Star Life. I write about anything that comes to mind but try to focus on finding the good in daily life.

7 Responses to What Not to Do: Think of Credit as Free Money

  1. John | Married (with Debt) on February 6, 2012 at 11:17 am

    This is one of our biggest mistakes, thinking credit is money. It is actually the idea of future money, and using it is a risky bet.
    John | Married (with Debt) recently posted..Questions to Ask Before Marriage: Money Edition


  2. Gemma on February 6, 2012 at 12:16 pm

    I can’t believe there are people who do still think of credit as free money but sadly there are. This is one of the worst finance mistakes you can make.


    • Jessica The DebtPrincess on February 6, 2012 at 11:32 pm

      So very true! So sad that I did it too. But in my mind, it really was free money.The whole buy now, worry later.


  3. 101 Centavos on February 7, 2012 at 8:32 pm

    Technically speaking, *all* money is debt. Picky, I know, but still true.
    101 Centavos recently posted..Buying Uranium When It’s in the Gutter


  4. Christa on February 9, 2012 at 3:50 pm

    When I was in college, I also started to use my credit card as cash. First it was gas here and groceries there, but they all added up to the point that I was using my card more often. It took a while to dig out of, and now I despise credit cards. Never again!


  5. Link Love February 2012 | Money After Graduation on February 24, 2012 at 10:04 am

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