Credit is just far too easy to use, especially if, like most people, you always carry a credit card with you. It is just so easy to put that expense on a card instead of touching your hard money. This leads to people making a lot of bad decisions. Take a look at 10 things that people often put on a credit card but probably should not.
- Vehicle Down Payments
While many dealerships do not allow down payments via credit card, many do and it is a huge mistake. With interest rates often over 20 percent, it can put you in a hole for a long time. Instead of putting that deposit on the charge card, shop around for financing before you go to the auto dealership. You might just be able to get an approval that does not even require a down payment.
- Dinners Out
When you pay for things like this on credit, it is easy for matters to get out of hand. Suddenly you are ordering appetizers and desserts that you wouldn’t have otherwise ordered and buying more drinks than normal. In addition, there is the temptation to be the big shot and comp the table with your card. Use cash or debit from your checking account to pay for meals. It should be a part of your regular budget anyway and if it is not, you probably can’t afford it.
Yes, people really do finance their puppies, in fact online pet loans are becoming a big thing but it is not always great to put that expense on a card. Pets, like everything else should be budgeted for. If you are thinking about charging a new pup, it is probably an impulse buy. Before making the plunge, you need to factor in all of the other pet expenses and put them in your budget. Things let regular vet care, food and even medical emergencies need to be considered.
- Regular Bills
You should have room in your budget to pay for your regular bills without having to resort to credit card usage. If you find that you need to pay a monthly expense with a card, you are living outside of your means and it will eventually catch up with you.
- Doctors Bills
Think that medical credit card is a great deal? It might not be once you read all of the fine print. That interest free period is usually deferred interest and not free. It is building up and when you fail to pay off the balance in time, it will be added back to your account.
Using your credit card at the gas pump can be a huge risk for several reasons. First off, it is a regular expense and one that should be paid for with your regular budget, not on credit. Second, you put yourself at risk of skimming. A skimmer illegally placed at a gas pump can record your card information without you having the slightest clue. Once the criminal has your information, they will sell it or charge your card up themselves.
- Items You Can’t Pay Off Now
A credit card is a purchasing tool that should not be used for long term financing. If you buy a high ticket item, be sure that you can afford to pay it off immediately. If not, you could find yourself paying on the debt for years at a very high interest rate. The low minimum payments are a credit card ploy designed to keep you racking up interest for years.
- Business Expenses
If you are starting a new business, the temptation is there to place some of those startup costs on a credit card bu you should resist those urges. Instead look into a small business loan. The process of getting the loan itself will help you organize your new business goals and plans. In addition, the interest will be much lower which is important because it can take well over a year or two to really start making money in your new venture.
The credit card cash advance is one of the most costly things that you can take out. Let’s say that you need 500 dollars ASAP, they might seem like a good choice but there are problems. The interest rate is much higher than that of other transactions and you might even have to pay a transaction fee with your bank and/or the ATM that you use to get the money.
- Impulse Buys
Your credit card can be a dangerous thing when you use it for impulse buys. If you are shopping just to have something to do or because you need a pick me up, carrying a credit card with you is a huge mistake. With high credit card limits, you can easily overspend and wind up with a mountain of debt all because you bough a bunch of things that you do not even need.
A credit card is a great financial tool. It can be used to provide purchase protection and it is a necessity for building and maintaining a high credit score. That being said, it can also be a dangerous item when not used responsibly. It can wreck a budget and drag your credit score down to the basement if used irresponsibly. So, by all means use credit cards as a tool, just use them responsibly.