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.
1. Furniture.
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!
Related: How To Save Thousands On An Engagement Ring
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.
4. Vacations.
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.
Related: How To Get Rid Of A Timeshare – Stop Wasting Your Money!
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.
Related: How I Paid Off $40,000 In Student Loans In 7 Months
6. Clothing.
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?
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Avery Breyer says
Love your advice and agree with all of it!
I hate it when furniture salespeople make those “no money down” furniture purchase deals. They always “forget” to mention that if you don’t pay it off before your 1 year is up, you’ll get hit with punitive interest rates on the loan.
And the idea of using borrowed money to finance a vacation just kills me… unless one is dying and the debt won’t matter to anyone, I can’t see a good reason to do that.
As you say though, if you have the willpower not to overdo it with credit card spending, the rewards can be great. For example, there are tons of credit cards in the U.S., and even Canada, that offer generous sign-on bonuses that can be used for travel. We did this to fly business class to and from Asia twice now – and the awesome part is that the amount of money we spent to get these credit card sign-on bonuses was less than the price of paying for economy class tickets…. so you end up flying in the luxury of business class for less than the cost of an economy class ticket! It works best for long-haul flights though… short-haul flight rewards aren’t nearly as good of a deal.
Michelle Schroeder-Gardner says
Thanks!
Dee @ Color Me Frugal says
That is truly frightening if a college is recommending paying tuition on a credit card. Especially when, in many cases, you could get a student loan for 6.8% interest or less. Very few credit cards have rates that low! Our general rule is that we don’t put anything on our credit cards unless we intend to pay it off immediately. Now it’s been years since we last paid any credit card interest. But we’ve scored thousands in credit card rewards 🙂
Michelle Schroeder-Gardner says
Credit card rewards are great! I just redeemed $600 worth.
Thias @It Pays Dividends says
I think a general rule of thumb (that goes well with your first point of furniture) is never put anything on a credit card that could cause you to buy more of that item since you aren’t paying in cash. For your example of furniture, if you know you aren’t paying cash that day, the chances are high that you will be walking out with a lot more furniture than you originally planned.
Michelle Schroeder-Gardner says
Yes, exactly!
Lance Cothern says
Thanks for the mention Michelle! I agree that putting many of these on a credit card without a plan to pay them off in full immediately could lead to a slow or sometimes fast disaster. Really, I wouldn’t advocate using credit cards in most situations unless you know you can pay them off in full every month. As always, there are exceptions 🙂
Michelle Schroeder-Gardner says
Welcome 🙂
Darren Howarter says
I must say it looks like a reasonable list but some people can’t manage credit at all and probably should only have a card for emergencies. I put EVERYTHING on a card because we pay everything off every month. I even bought cars on a credit card. We have earned tons of miles for free flights all over the world because of this but it takes discipline and budgeting. We saved the money for the car, we just use the card to build miles. This has been a huge tool in helping us control our finances and fulfill our dreams.
Michelle Schroeder-Gardner says
Yes, I agree Darren. Thanks!
Reelika @Financially Wise On Heels says
Great points. I would never finance my clothes, my son’s toys, etc items with a credit card either. I would never go on a trip like that either, I would rather side hustle before and use this “extra” money to purchase what I want.
Michelle Schroeder-Gardner says
Yes, same here!
Holly@ClubThrifty says
I would only put these expenses on credit to earn rewards. But I would turn around and pay the bill right away to avoid interest =)
Brian @DebtDiscipline says
Agree with Holly this is the only way to use credit cards. Pay in full at the end of the month!
Michelle Schroeder-Gardner says
Yes, that’s what we do as well 🙂
Michelle Schroeder-Gardner says
Yes, same here!
Money Beagle says
We’ve put a few of these on credit cards, but every time, we followed the rule that we already had the money. When we bought most of our furniture, interest rates on savings accounts were around 5%, so we were happy to defer the payment and earn the interest on the amount we already had set aside for an extra year (now, we probably wouldn’t bother). Weddings, vacations, clothes, again all items that we had money set aside, but we put on cards just to get the 1-2% cash back, which can add up very quickly with such expenses. I agree, if you can’t afford it, don’t do it, but if you have the money, then a quick swipe followed by a payment a couple of days later might add a little extra to your bank account.
Michelle Schroeder-Gardner says
Yes, thanks!
Kristin says
Ha, my first CC was with a clothing store at the mall. I had just turned 18 and I’ll never forget the excitement of the shop girl telling me I was approved 🙂 Luckily I was smart about it and still have it. Now it looks great for my credit history. I do pretty good with credit cards now, but I feel like you should have to take a class or something on how to use one responsibly.
Michelle Schroeder-Gardner says
I still have my CC that I got as my first one when I was 18. Love it!
Sylvia @Professional on the Go says
I am like Holly, swipe for the rewards points and then pay off the balance in full. So far this plan has worked well for me and I don’t plan on doing it forever. Just want to get enough points for two plane tickets.
Michelle Schroeder-Gardner says
That’s exactly what I do as well. 🙂
Alexander Vishnevsky says
Credit card is a two-sided weapon. On one hand it can be rewarding because when using it you can have bonuses, on the other hand – it can hurt its owner and lead to big stress if used irresponsibly. Be aware of what you’re doing. If you use a credit card, use it responsibly. Thanks!
Michelle Schroeder-Gardner says
Thanks Alexander!
Latoya says
Oh man, all of these are great tips!
Furniture- I did this once and I’ll never do it again. The catch is that after the interest free period is up, they’ll tack on the interest that would have accrued during the interest free period if it’s not paid off in full. Not worth it.
Medical Bills- I see so many people put this on credit cards and it never makes any since. I had about $1100 left over this summer after having my son and I set up a payment plan. There’s no interest fee and you pay the amount you can afford to cover the bill each month.
Clothing- I do have one card that I use often for a children’s store so I can get the extra 5 percent off the awesome sales and coupons that they have and I often get clothes cheaper than I would on consignment or at thrift clothes (and they are new at that). However, I always make sure to pay it off in full before the bill comes because the interest would quickly wipe out any savings I made by using the card in the first place. Most people might not think about this, but it is important to only use cards for percentages off if you can pay the bill in full.
Michelle Schroeder-Gardner says
Yes, I wish more people realized that about medical bills – usually there’s no interest if you go on a payment plan!
Michelle Schroeder-Gardner says
Paying cash is always a good idea!
Wendy@BlushandBarbells says
I put EVERYTHING on a credit card – I love my FF miles. I do pay it off in full when the bill arrives, though.
As far as college tuition…I wonder if it was suggested to put it on a credit card because student loans aren’t covered in bankruptcy, but credit card debt is. That’s a pretty grim view of the future, though.
Michelle Schroeder-Gardner says
Yeah, that’s a pretty grim view haha. I’m not sure why they recommended it.
Jen says
I actually put everything on my credit card but make sure that there’s enough in the bank account to pay it off. I agree with some of the comments, I only do this earn cash back rewards, couple that with the ebates cash back, woo hoo…that is IF you make sure you can pay it off when the bill comes!
These days it seem every retailer is trying make us open a credit card, it’s so easily tempting. Must be strong!
Michelle Schroeder-Gardner says
Yes, I do the same thing 🙂
Erin @ Very Erin says
Yes, these are all so true! I write a lot about wedding planning and one of my biggest pieces of advice is to NOT put your wedding on a credit card (though technically we put our wedding on a credit card for the travel rewards, but paid if off IMMEDIATELY). We’re married about 6 months now and saving for a house. I can’t imagine how much I would be kicking myself if the cost of my wedding debt was preventing me from saving for that house!
Michelle Schroeder-Gardner says
I agree Erin!
RAnn says
It really comes down to whether credit cards are, for you, a payment method (and paid off at the end of the month) or whether they represent borrowed money. I suggest that there are few things in life worth borrowing money to purchase. On the other hand, my furniture didn’t cost me any more when I financed it interest-free for five years, and they wouldn’t give me a discount for cash. That $40 a month is money I never miss–but I bought the furniture I needed/wanted and didn’t “upgrade” due to the financing.
Michelle Schroeder-Gardner says
Yes!
Michelle Schroeder-Gardner says
Yes, I agree!
jolie says
It is frightening to see colleges/universities recommending using a CC to pay tuition. Even if you pay your balance off each month, most colleges charge a % fee (ours was 2.5% if we had done that) of your charged amount to do so. Tuition is enough without paying that % fee.
Michelle Schroeder-Gardner says
Yes! Colleges still charge an extra fee too. Maybe the counselor got paid a referral fee for telling students to do that?
Victoria@ The British Berliner says
These are really good points Michelle. I live in Germany so legally, banks are required to be somewhat responsible and Germans are by rule, quite conservative when it comes to financial issues LOL!
However, to add to the discussion, I would say to either pay off spendings at the end of each and every month, or to keep the credit card (s) as a reserve.
Michelle Schroeder-Gardner says
Yes!
Jason B says
I can’t lie, I’ve made the mistake of paying for a vacation with a credit card and not paying it off the next month. I was young and didn’t care back then. It took me a while, but I learned my lesson.
Michelle Schroeder-Gardner says
Good thing you learned 🙂
Jacob says
I can see down payments, college and medical bills, but I put EVERYTHING else on cards 🙂 Don’t want to lost out on the points!
BUT, I do agree that these large purchase items are tempting to put on a card if you CANNOT AFFORD IT. In that case, stop being impatient, save the money AND THEN buy the item 🙂
Michelle Schroeder-Gardner says
Haha like I said, this post is not about putting them on credit cards, it’s about whether or not you can afford them.
I put everything on CCs as well. If it earns me more points and rewards than whatever fee I may pay, I’m going to do it! In fact, just paid a $70 CC fee and paid a tax bill with my CC. It earned me $600 in rewards cash so it’s a win for me!
J. Murray says
Fantastic tips. I’ve been guilty of a few of them, especially clothes and vacations.
Michelle Schroeder-Gardner says
Thanks!
Bryan says
Thank you for the reminder of the fundamentals. Cash is king. I use to have a big problem with CCs and ditched them for 6 months. It was hard but my net worth actaully started growin. I then learned about points and how you can actually come out ahead if cards are used right. So far I’ve paid off every monthly statement and no fees. In the meantime I earned over $4000 in rewards. Yahoo!
Michelle Schroeder-Gardner says
Good job!
Jaime says
Plastic surgery. I was reading Holly Madison’s book “Down the rabbit hole” and she mentions how she paid for plastic surgery with credit cards.
Alexander Vishnevsky says
Don’t do plastic surgery. Heal your body instead. By doing plastic surgery you will just “hide” a problem from other people’s eyes, but the problem actually remains.
Michelle Schroeder-Gardner says
AH!
Jayleen says
We have paid for my husband’s continuing education and my daughter’s braces with a credit card but only after asking if they gave a cash discount. We then paid them off right away … and got rewards! Yay! I have to admit, we have credit card balances now though. It gets away from you real quick.
Michelle Schroeder-Gardner says
Yes, it can.
Melissa says
I get so tired of practically every store pushing their credit card on the shoppers, and so many people go for it! The rewards aren’t worth it, in my opinion. But if you handle them well, credit cards can be a great way to get awesome rewards!
Michelle Schroeder-Gardner says
Yeah, usually store credit cards are the worst!
giulia says
Agree also if I use prepaid car to book and pay fly, but every time I do is planned expenses., but I choose to pay cash everything and using prepaid card I know whihc amount there is inside……luckily I ‘m debt free so I can focuse more on savings!!!
Michelle Schroeder-Gardner says
Debt free is great!
Brittney@ Life On A Discount says
Interesting points. We have actually used 0% financing to buy furniture before and were lucky to not have any issues. We financed $500 to buy a couch and end table in college. We had 12 months 0% interest and paid it off in 4 months. Probably wouldn’t do it again, but it worked out fine.
I actually leveraged credit card rewards to pay for our upcoming trip to Europe. We saved up the money ahead of time, but applied for two rewards credit cards. Each have 0% interest for 12 months and offered $600 in rewards for $3,000 in purchases. Our trip came to $7,000 and we got $1,200 in rewards. We paid off the cards in two months with the money saved.
So I agree you shouldn’t extend yourself with credit, but I am not opposed to strategically and responsibly leveraging credit.
Michelle Schroeder-Gardner says
Yes, I agree with you. Like I said in the post, I am all about credit card rewards and I put EVERYTHING on credit cards haha. The point of this post though is that you shouldn’t buy things with credit if you can’t afford it though.
Amy @ DebtGal says
Good points.
Amazingly, my parents paid for my college, and they charged it and paid it off right away, every semester. They earned a TON of frequent flier miles that way!
Michelle Schroeder-Gardner says
Awesome!
Rose says
This was a great post and I agree with all of it. I would prefer to not pay with credit cards unless I am going to get some rewards for using it AND be able to pay it off right away. The major purchases you mentioned are not something I would want to be paying for well into the future with those extra fees attached to them. Smart move. 🙂
Michelle Schroeder-Gardner says
Thanks Rose!
Cece says
I did put a down payment for a car on a credit card once but I had the money and paid it off. I did it for the points. Buying a timeshare with student loan money what? SO BAD. I typically use credit cards for one thing at a time, and usually pay it off before it’s due. I can’t stand the interest. If I don’t pay it off before it’s due I usually have a plan in mind to pay it off in something like two payments. Reasonable chunks.
Michelle Schroeder-Gardner says
Yes, so bad!
Gandolfo Beneventi says
You are totally right:
Using credit-cards is like riding bull, when you riding bull you have feeling that you are on top of the world and you can go trough walls. But if you don’t know how to ride it, you are in trouble. My ex wife, when she was using credit card, looked like newbie cowboy who wants to impress all around and screws everything.
Katie says
Another great thing to do for medical expenses is Care Credit. More and more places are accepting them. It is a credit card, but you apply for the expected amount and can pay it back within a certain time frame with no interest. It’s something my family is doing for a surgery for one of our dogs.
DNN says
One thing I learned about credit cards is that if you have an aged credit card even if you don’t use it but activated and you decide to cancel it for whatever reason, it’ll negatively impact your overall credit score. I cancelled one credit card because I got sick of a credit card company I was dealing with at the time trying to charge me interest in purchases and cash advances AFTER I paid the entire balance in full. I had to call the credit card company and DEMAND they stop their fraudulent crookery. I didn’t threaten legal action as the customer service rep I was dealing with at the time was playing cool. But I knew what they were doing was wrong. My credit score suffered for a few months and dropped over 100+ points, but I got it back up thankfully in a short period of time. I learned to keep a credit card paid off even if you don’t decide to use it later because it can play a serious role when you go to try and mortgage an expensive home later down the road.