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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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!
I agree Erin!
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.
Yes!
Yes, I agree!
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.
Yes! Colleges still charge an extra fee too. Maybe the counselor got paid a referral fee for telling students to do that?
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.
Yes!
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.
Good thing you learned 🙂
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 🙂
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!
Fantastic tips. I’ve been guilty of a few of them, especially clothes and vacations.
Thanks!
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!
Good job!
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.
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.
AH!
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.
Yes, it can.
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!
Yeah, usually store credit cards are the worst!
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!!!
Debt free is great!
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.
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.
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!
Awesome!