Home > Credit Cards > 10 Purchases You Shouldn’t Make With Your Credit Card

Comments 1 Comment

Many credit cards offer a slew of incentives to consumers to use them — cash back and other rewards — and many protect the cardholder with zero liability in case of fraud. But credit cards are not always your best form of payment, and it sometimes may be in your better interest to keep them tucked away.

Here are 10 purchases you should probably avoid making with your magic plastic:

1. Household Bills

There can be a major problem with this approach for many people: If you are already cutting it close for the month, you may be tempted to take care of the utility, cellphone or cable bill, just to name a few, with the card. But if you’re not paying off your full balance each month, the interest you’ll be charged will make those monthly bills even more expensive.

If you are indeed responsible with your credit cards and are attempting to rack up rewards, this should be done at your discretion, but only if you have cash on hand to fully cover the transactions each month.

2. Cars 

Car dealers often don’t allow this, or may limit the amount of the purchase price you can put on your credit card. The 1% to 3% fee from the card company to process the transaction will cut into their profit.

You could exercise the cash advance option. But you’d pay a fee and a higher interest rate and also get no grace period on the interest. It begins to accumulate right away.

Go to a credit union or a bank to get financing approved at a reasonable interest rate before you shop for a car.

3. Student Loans

If you can’t afford to pay your federal student loans, you have options like an income-based repayment plan, deferment, forbearance and possibly loan forgiveness.

Paying your student loan debt with a credit card will only increase the amount of interest you’re paying on the debt. Even if you have a 0% introductory credit card offer, it will expire in time.

And while the federal government will accept a credit card payment for loans in default, many student loan servicers won’t allow this form of payment.

4. Retail Therapy

Think a new purchase will cheer you up? Cash is king in this case so your credit card balance won’t spiral out of control. Plus, keep in mind that the positive feeling you get from buying something is usually short-lived.

5. Medical Bills

Last year the Consumer Financial Protection Bureau ordered one of the providers of medical credit cards to refund $34 million to customers after it accused the company of deceptive enrollment practices. If you use a medical credit card available through your health care provider’s office to pay your bills, be careful to read the fine print about your obligations.

Better yet, talk to the provider about working out a payment plan.

Also consider steps you can take to reduce your health care costs.

6. A Night on the Town

Handing your credit card to an unscrupulous waiter equipped with a skimming device isn’t the only thing you need to worry about. If you’re out on the town throwing back drinks, it’s very easy to run up a tab you really can’t afford.

In these scenarios, it’s best to pay with cash and save yourself remorse.

7. Big-Ticket Items that You Can’t Immediately Pay Off

I am well aware of the purchase protections that accompany many credit cards, and credit cards should be used for big-ticket purchases. But buying something on credit when you can’t afford to pay it off right away isn’t smart for a number of reasons, a high interest rate and a risk of a late payment or default are just a few.

8. Credit Card Payments

You can’t charge your monthly credit card payment on another credit card. But perhaps you’ve been tempted to use a cash advance from a credit card to bolster your checking account so that you can pay your other bills. We’ve already explained how cash advances work. Your credit card is not an ATM and should not be used as one.

There are real benefits, however, to transferring high-interest credit card debt to a new card with a generous 0% balance transfer offer. Just be aware of the balance transfer fee and the length of the offer, and decide if it makes financial sense.

9. ‘Sale’ Items

Convinced that you may miss out on savings if you don’t purchase a specific item on sale right away? That’s one of the warning signs of an impulse buy. Wait a day and think about whether you really need it; nine times out of 10, the answer will be no.

You aren’t really saving money if you’re spending money for something you don’t need, and buying with a credit card makes the transaction even easier.

10. Unsecured Online Purchases

Does the Web address have an “https” at the beginning? If not, that’s your cue to take your online shopping elsewhere. In fact, do your homework before you purchase anything online to make sure a company is reputable and not the source of many consumer complaints.

Your credit card should be perceived as a last-resort safety net. It’s up to you to be a cautious and knowledgeable consumer.

This post originally appeared on Money Talks News.

More from Money Talks News:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • http://www.credit.com/ Credit.com Credit Experts

    Almost anything else. Cards are especially useful for making travel reservations and making purchases that will be delivered later. We wrote about some other smart ways to use credit cards here: Six Smart Credit Card Strategies

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team