Contrary to MasterCard’s beliefs, you should never pay for something with your credit card just because you can. While there are certainly times when it’s a good idea to charge a credit-building purchase to your account, there also many occasions when you should stuff that piece of plastic so deep into your wallet that it will never, ever see the light of the register scanner.
Some purchases just have a way of turning your credit card balance into a financial guillotine, and if you aren’t careful you could lose your head. Think twice about these kinds of transactions:
1) Your bar tab. Almost every bar in the country is happy to start a tab on your credit card, but when it comes to paying for drinks you should always stick with cash. Running a tab makes it easy to order more drinks than you planned for. When you don’t need to pay your server up front, it doesn’t take long for a few rounds to turn into several more – and a $100 charge. If you’re young, that sort of overspending can be a major budget buster.
2) Your tuition payment. Lots of people pay their own way through college. Lots of college students have credit cards. Only really foolish college students try to pay their tuition with a credit card. The interest you’ll incur from trying to pay off that balance over time will eat you alive. If you really can’t figure out a better way to finance your education – (ahem) student loans (ahem) – it might be time to enroll in that remedial accounting class.
3) ATM withdrawals. Your credit card might look exactly like a debit card. It might feel exactly like a debit card. It might even taste exactly like a debit card, if you’re into that sort of thing, but it is not a debit card – and it never will be. Credit card companies put massive APRs on cash advances in order to fleece customers who are foolhardy enough to use their cards to withdraw money at an ATM. So the next time you’re thinking about using your credit card to get a quick $20 for bar cover – don’t. The only thing you’ll find in that cash slot is suffering.
4) “Sin” Purchases. Do you want the world to know that you’ve been buying “marital aids” from that creepy warehouse down the street? Do you want your wife to wonder who ended up receiving that bouquet of roses you bought last week? Then stick to paying with cash. Cash is anonymous. Credit cards are not. Every time you swipe your credit card, your purchase is being stored on a virtual database, and once it’s there, it isn’t coming off. Ever. All it takes is one enterprising hacker to crack the code and your dirty laundry is at risk of being aired out all over the world.
5) Luxuries you can’t afford. A credit card is not your VIP pass to a luxury lifestyle. You are going to have to pay back every dollar you charge – with interest. If you don’t have the cash to pay for that big screen TV or Botox session up front, then you shouldn’t be putting it on your card. Major purchases are only good credit builders when you can pay them off on time and in full. Any expense that doesn’t fall into that category should be avoided like the plague.
Credit cards are a double-edged sword. Used correctly, they can help you build a good credit score and can qualify you for very attractive home and car loans. Used incorrectly, they can leave you hunched over on the floor, bleeding money. If you want to stay on the right side of your card, make sure you never charge any of these purchases. After all, we’d hate to say we told you so…