Almost 40% of Americans Are Making a Major Credit Card Mistake

There are good ways to use credit cards -- like charging some purchases, earning rewards, and then paying your cards off in full and on time. Doing this can help you get cash back or miles for purchases you're making anyway -- and can help you to earn a better credit score.

But there are also some bad ways to use cards. And unfortunately, as many as 40% of Americans are making a major mistake with the way they're using credit. Here's what's happening, why it's such a problem, and what you should do if you're one of the many who may be using cards in a way that could lead to long-term trouble for your personal finances.

Far too many Americans are using their cards in a dangerous way

A recent study from Ramsey Solutions on "State of Personal Finance in America" has revealed something really troubling about credit card use. According to the research, close to 40% of Americans have indicated they are relying on their cards to cover basic monthly expenses.

This is a huge problem for a few reasons. For one thing, it means people are spending beyond their means if they have to rely on credit cards and can't cover the essentials out of their bank account. This is a big issue in and of itself, because if you can't pay for necessities without relying on debt, it's going to be impossible for you to save for emergencies, big purchases, or important future life events like retirement. This makes you vulnerable to financial problems for years to come.

And that's not the only problem with relying on cards to cover the essentials. Credit cards are a very expensive financing option when you're paying interest. The average credit card interest rate is 21.47%. So if you are relying on your cards to cover all of your basic costs, you're essentially paying even more for those essentials. This means people who are already struggling to pay for the basics find themselves with even less money because those basics are over 20% more expensive each year thanks to the credit card interest they're paying.

That brings us to the next problem, which is that those credit cards have to be paid off. Each month, there will be a credit card payment to make -- which leaves you with even less money to pay for the basics, which in turn makes it more likely that you will find yourself relying on debt.

For all of these reasons, covering basic essentials with credit card spending is a huge problem.

What should you do if you're covering daily essentials on a credit card?

If you're among the 40% of Americans relying on credit card debt to fund your lifestyle, chances are good you already know this isn't an ideal situation. But, there are some options for trying to get out of this cycle.

One of the best solutions would be to try to make a major cut to one fixed expense that frees up money so you can more consistently spend below your means. This approach can be a lot better than trying to nickel-and-dime yourself, stripping little luxuries out of your budget and forcing yourself to get by with less each month. If you can cut your housing costs by getting a roommate or your vehicle costs by downsizing to a used car, for example, those are one-time changes that will consistently give you more money without constantly forcing yourself to spend less.

Other possible options could include increasing your income (perhaps by taking on a side hustle) or resolving to temporarily live on a strict budget that will help limit spending so you can cover your costs without the help of credit cards.

It's worth exploring all of these potential solutions. Continuing to rely on cards to cover essentials just isn't something you can do for the long term due to the huge costs and the future challenges you're creating for yourself by racking up more bills to pay.