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!
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.
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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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.
Thanks!
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 🙂
Credit card rewards are great! I just redeemed $600 worth.
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.
Yes, exactly!
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 🙂
Welcome 🙂
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.
Yes, I agree Darren. Thanks!
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.
Yes, same here!
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 =)
Agree with Holly this is the only way to use credit cards. Pay in full at the end of the month!
Yes, that’s what we do as well 🙂
Yes, same here!
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.
Yes, thanks!
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.
I still have my CC that I got as my first one when I was 18. Love it!
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.
That’s exactly what I do as well. 🙂
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!
Thanks Alexander!
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.
Yes, I wish more people realized that about medical bills – usually there’s no interest if you go on a payment plan!
Paying cash is always a good idea!
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.
Yeah, that’s a pretty grim view haha. I’m not sure why they recommended it.
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!
Yes, I do the same thing 🙂