Credit cards are exciting tools to have. They are like a passport that can lead you into a world of all sorts of wonders. But they can also be like a two-edged sword, leading you down a rabbit hole in financial tragedy if you are not careful. Every person needs to learn how to be smart with this tool, otherwise, they can severely damage their reputation and lose everything they’ve worked for.
It may seem that these little pieces of plastic can be used in a wide variety of situations, but there are some things that you should avoid charging on your card. When the bill comes, you’ll be faced with paying for things that could tie up your finances for months and sometimes even years.
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1. Down Payments
Putting money down on a car or home could be pretty simple if you use a credit card, but it’s worth taking a pause to think about what you’re actually doing. When you’re buying a big-ticket item, you’re already agreeing to pay a certain amount of interest on the purchase. Putting the down payment on your credit card will only add even more interest payments to the debt you will owe. It’s better to wait until you have all the down payment than to start down this road.
2. Tuition
College tuition can be quite costly and using a credit card may seem like the easiest way to foot the bill. However, interest rates on credit cards are usually much higher than interest rates for other types of loans. In the long run, it will cost you far more than you might think to pay off tuition on your credit card. Your best bet is to find alternative financing through student loans, which carry a much lower rate of interest. Even better, apply for scholarships or grants. If you’re eligible, you won’t have to pay anything back.
3. Mortgage Payments
Charging your mortgage payments is another way to get sucked into a high debt cycle. You may get your monthly mortgage payment covered but it’ll take you a lot longer to pay it back. Interest rates on credit cards can be pretty high – add that to the interest rates you’re already paying, and you’ll find you’re literally digging a deeper hole for yourself. It also means that you are reducing your available credit limit, which can have a negative impact on your credit score. This will eventually add more debts on you, so if you have been drowning in debt then you can take the help of professionals at AccreditedDebtRelief who will understand your situation and provide possible solutions.
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4. Basic Household Expenses
If you’re having trouble paying your basic household expenses, you’re also going to have trouble paying the additional interest rates you’ll have when you use your credit card. If you’re struggling at this point, it’s time to rethink your living situation. Maybe it’s time to get into something more affordable or at least make a few adjustments to your spending.
5. Weddings
Weddings can be very expensive occasions and it may be easy to just charge it with every detail. However, when these expenses are charged, you may not even realize just how much money you are spending, which could cause you to over-extend yourself financially. It also starts off your new life under a huge burden of debt. It’s better to wait until you have all the cash on hand and then start planning your special day.
6. Indulgences
Paying with a card is easy at your local eateries and coffee shops. Often you don’t think much about that $5 cup of coffee on your way to work every morning or that quick bite you pick up for lunch every day. Without realizing it, your balance could quickly get beyond your limits leaving you with a monster payment at the end of the month. For small indulgences, it’s better to make a habit of using cash to pay. You’ll realize just how much those things are costing you if you do.
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7. Cash Advances
Credit card interest rates are already high enough, but the interest on cash advances is even higher. You might find that you’re paying as much as 23% interest on that small cash advance. And if you don’t pay it off within the 30 days, it could accumulate. Not to mention the additional transaction fees that are usually attached.
8. Medical Bills
Nothing can throw you off more than an unexpected illness or accident. Medical treatment in any form can be very expensive but using your credit card could send your finances into a spiraling tailspin. It is better to work directly with the billing department of your health care provide to create a separate payment plan.
Accumulating credit card debt can be very serious. To avoid getting into such situations, it is best to be smart about your spending from the very beginning. Learning to be responsible when it comes to how you use your credit cards can help maintain and even improve your credit score and serve you better over the long haul.
