It’s hard to believe that there are so many instances where you shouldn’t use your credit card. Most of us take it for granted and start to liberally use it which in turn leads you to debt. After my first and second parts on safely using your credit card to avoid credit card debt, here is the final list of situations to avoid using your card.
1.If you can’t afford to pay cash for at least half the purchase
It’s not worth using your card to make a purchase if you don’t have sufficient cash to pay off at least half the amount. Supposing you need a computer but don’t have money to pay for it now, it’s better to wait till you actually do.
You should charge the purchase only if and when you can pay off half the amount right away and then make plans to repay the remaining amount in a month or two. You don’t usually make an overnight decision to buy a computer. You should start saving for it a few months before hand and then consider buying it only after you have enough to pay for at least half the amount. You can then use the credit card to pay the remaining amount.
2. Expensive tickets you can’t pay off immediately
It is true that credit cards offer its customers great purchase protections and should be used for buying expensive tickets. However buying something on credit which you can’t actually afford to pay off immediately, is complete folly on your part ad not worth it at all.
3. To gain rewards points
Never let reward points be the reason to make purchases. You need to make decisions purely based on the merits of the purchase or else you only end up overspending and in debt for unnecessary purchases.
Instead, if you want to go on a vacation to get points, stop your coffee or desserts or perhaps find cheaper parking options so that you end up saving at least $5 a day for a year. This way you will be able to afford your vacation and can pay for the payment with your card and earn all your rewards points!
4. Paying off other credit card balances
Of course, it is not possible to charge your monthly credit card payment on another card. However you never know, you may get tempted to use a card’s cash advance to improve your checking account to pay off other bills. Don’t do this as it’s folly as your card is not an ATM nor should it be used as one.
As mentioned in my previous post, there are benefits of transferring your high interest card debt to a new card using a zero-percent balance transfer offer. This is worthwhile only if you know the balance transfer fee and how long the offer lasts.
5. When prices are expected to drop
There seems to be deflation for many things in society today. So if you think something is going to cost you less in three months, there is no point in your starting to pay off interest on the purchase today right? Instead of using your card and paying higher rates it’s better to wait for a while and buy when rates drop to save money.
6.To buy things on sale
So you think you are missing out on a huge savings if you don’t immediately buy some things on sale. Well, this is a warning sign of impulsive buying which you need to recognize.
Wait for a day or two instead of buying immediately. Some people follow a 24 hour rule where they wait for 24 hours to decide if they really need the item. In most cases, the answer is usually a “no”. No point spending money on something you don’t need!
7.Buying things online from unsecured sites
Don’t take the risk of charging online if you don’t know who you are dealing with. Of course, you do have some protection under the Fair Credit Billing Act. However the damage you end up facing during the time span of 30 days or till you see the purchase in your bill is not worth it.
While you can conveniently make payments for any purchases you want online through your credit card, it’s important that you first study the website. Look out for any suspicious wording to ensure the site is actually legitimate and worth your time and money.
Generally sites with a web address with an “https” at the start are safe. If the site doesn’t have it, it’s better to do your shopping elsewhere.
8.If you are charging for payments you used to do in cash
This is a big red flag you need to recognize, as it indicates that you are indeed falling into the debt trap. If this is the case, it is time that you took a look at all your credit card statements so that you can identify any budget issues you may have.
On the contrary if you suddenly have lots of car repairs or travel expenses to bear because of a sick relative, its better if you start a savings account to pay for these things instead of just relying on credit. This way you will have some of your own money to fend for these emergencies instead of depending entirely on credit and the card all the time.
With the help of all this information and three posts, you now know when it’s safe, and when you should not use your credit cards, and avoid falling into credit card debt!