Personal Finance Advice

Whipping out a credit card to make purchases is usually quite convenient, and for this reason some people use it as a default method of payment for everyday purchases, even if they have the money available in the checking account to make the purchase with a check or debit card. For some people it’s the convenience that makes credit cards alluring, and for some people it’s a rewards program that makes credit cards the paying method of choice. There are also some people who use credit cards because they don’t have the money available to make purchases, and most people recognize that this scenario can turn into a bad financial situation quickly.

If you carry a balance from month to month on your credit card, most financial experts will agree that it’s best to try to lay off making purchases on your credit card and to get into a financial situation where you can pay the balance off every month so you can avoid interest charges. If you insist on using your credit card for whatever reason, and especially if you plan on carrying a balance, there are some things that you simply should avoid paying for with your credit cards.

Using a credit card to make some purchases can work to your advantage. Some credit cards offer purchase protection so if the merchant won’t reimburse you for a bad product or inadequate services, your credit card company may credit the amount back to your account.  On the other hand, there are some things that just shouldn’t be paid for with a credit card connected to a revolving credit account.

For example, if you don’t have the money to go out to eat with friends, but you have the available credit to pay for a meal out, it’s not a good idea to go ahead and go out to eat with your friends using a credit card to pay for the meal. Why? First of all, a credit card is a loan, so essentially you’re taking out a loan just to go out to eat with your friends. If you carry a balance on your credit card from month to month, this means that eventually you’re going to pay interest on the meal out. That’s a pretty big financial consequence for a meal out.

It’s different if you’re going out with business associates and you need to use a company credit card to pay for the meal. When you’re the one footing the bill, though, this just isn’t a wise use of credit.

Don’t put luxury items onto your credit card if you carry a balance. A trip to the spa that you put on your credit card may wind up costing three or four times the original cost by the time you get it all paid off along with the interest accrued. You should also keep in mind that you’re usually willing to spend more if you use a credit card to make the purchases as opposed to using cash, so when the massage therapist suggests a soothing body scrub you might decide that sounds like a pretty good idea instead of knowing that you can’t afford the additional service.

You don’t have to avoid using credit cards altogether, but don’t use credit to buy things you don’t really need and can’t really afford.