Oh, credit cards. You either love them or you hate them.
For me, I love them. I love the credit card rewards that come along with responsible credit card usage.
However, I know I’m not the norm.
I’ve seen the mess that credit cards have brought upon others, so I know that not everyone feels the same way as I do.
Irresponsible credit card usage can lead to high interest charges, late fees, and a ruined credit score.
It can also lead to a person spending much more money than they originally planned for. By signing up for financing or paying for a purchase with a credit card, it may make the item seem more “affordable” due to the fact that you aren’t paying for it with money that you already have.
Just because the monthly payment seems “doable,” it doesn’t mean that it’s what’s best for you. Debt can lead to stress, a paycheck to paycheck lifestyle, delayed retirement, and more.
These are all things that no one wants, especially if there are other ways around it!
Side note: Of course, there are always exceptions to the rule. If you know how to take advantage of certain financing offers then you may be able to come out ahead. However, if you know that you are not good at handling credit cards and debt, then it may be best to avoid them completely and to not finance the items that I have listed in this blog post.
Below are several items you should never finance or put on a credit card unless you are 100% positive that you can pay them off in full before any interest charges or fees accrue.
Earlier this year we bought a few new furniture pieces after we moved to Colorado. The salesman kept saying that we could just finance everything and then we wouldn’t have to feel the pain of spending money all at once.
This is a horrible idea! Furniture can be quite expensive and it can be very easy to have a large bill after leaving a furniture store. No matter how enticing those furniture financing offers may be, please remember that you will have to pay for the FULL cost eventually. Too many get caught up when they think about the monthly payments, but it’s the full cost that is important.
If you don’t believe me when I say that financing furniture is a bad idea, read more about it on my friend Lance’s blog post Financing Furniture At 0% Is For Suckers.
2. Wedding expenses.
Having a wedding can be fun, but it is not worth it to start out your life with your new spouse in debt. Wedding debt can cause arguments, stress, financial problems, and more.
Weddings can be expensive or they can be affordable. A wedding can be done on any budget, no matter how low your budget may be. Remember, you can get married just for the cost of a marriage license!
3. Medical bills.
Medical bills are something that no one wants to experience. However, they do happen. Before you resort to putting your medical bills on a credit card, you should contact the hospital and see if you can receive any applicable discounts for paying in cash. Then, ask if you can be placed on a payment plan through the hospital.
Yes, that means that you will still have a monthly payment. However, your interest rate is most likely going to be much lower when paying the hospital directly rather than paying the high interest rate that your credit card charges.
I bring this true story up a lot, but it is one that still shocks me every time I think about it. I know someone who uses their student loans to pay for vacations and they have even bought a few timeshares with their student loans as well.
This is a horrible idea!
A vacation is supposed to be that – a vacation. I couldn’t imagine that a vacation would be relaxing at all if you were paying interest on it for months or years to come.
There are many ways to have an affordable vacation without any debt. I recommend checking out my post How To Save Money On Hotels And Go On More Vacations for more information.
5. College costs.
Recently, someone approached me and asked if they should put their college tuition on a credit card or if they should apply for student loans.
The credit card had an interest rate of around 20%, so you can only imagine how shocked I was when the college’s financial office was actually recommending this.
Before you put any college expenses on a credit card, you should think about how much that large interest rate is going to impact you. Plus, your college will most likely charge you a fee for putting college costs onto a credit card as well (such as 2% or 3%), which can quickly add up as well.
Numerous clothing stores now offer credit cards. They lure you in with a free item, $25 off, 5% off, or something else that is relatively small.
If you are not good with credit cards, please ignore these offers! The small reward you may receive is not worth the trouble.
Clothing never needs to be financed. If you’re desperate, you could always visit a thrift store for the items you need. However, I don’t know of many instances where a person would be so desperate for clothing that they would need the debt that goes along with it.
7. Down payments.
If you can’t pay for a down payment upfront, you most definitely do not want to put it on a credit card with a high interest rate.
This is due to the fact that you will have to pay for interest charges for months or years to come. It most likely will not make whatever you are paying for worth it if you are paying an extremely high interest rate.
It’s much better to save up cash for the down payment that you are needing.
What do you think of financing the above items with a credit card? What else should a person never finance?