10 Times to Never Use a Credit Card

Using a credit card can be advantageous in many ways, allowing you to build your credit and reap rewards. When used responsibly, a credit card can be a great thing. However, there are scenarios in which it is not wise to use your credit card. Below is a list of times to never use your credit card:

1. If you cannot pay off the debt in full. Do not use a credit card to finance something that you cannot afford to pay off in full. Credit card interest rates tend to be extremely high and make these purchases difficult to pay off as the interest increases the price of the purchase significantly.If you need to make a large purchase and you do not have the cash to pay for the purchase, there may be better alternatives, such as:
   • Saving up some money for the purchase first
   • Applying for a personal loan – the interest rates tend to be significantly lower if you have good credit
2. To pay your taxes. On top of the high interest rates that you will pay on your credit card financing, the IRS will also charge you a fee of 1.5 to 2.25% of what you owe. If you file with an online tax software, you may pay an even higher convenience fee.You are much better off negotiating with the IRS an online payment agreement or an installment payment option. These two options are great for people who can afford the monthly payments but cannot necessarily afford the full tax burden at the time of filing. These options will be significantly cheaper in the long run than financing your tax burden on your credit card.
3. Just to build your credit score. Do not be fooled into thinking that you must make large purchases on your credit card in order to build up your credit score. Use your credit card for normal daily purchases and make sure to pay them off in full every month, and your credit will be just fine.
4. Just for the rewards points. If you miscalculate your rewards versus the interest you will pay, or something happens that makes it difficult for you to pay off your debts, you will end up getting stuck paying high amounts of interest for a handful of rewards points that will never help you pay off the debt. While there are times when the rewards points are a great bonus, you should not make purchases decisions strictly for the rewards points.
5. To take out cash. You should absolutely never take out a cash advance. The interest rates are around 24% on average. This interest burden is staggering and should be avoided at all costs.
6. To pay for emergency expenses. You should start building a cash reserve for emergency situations so that you do not have to finance emergencies on your credit card. Set aside some amount from your paycheck or income every single month that is designated specifically for emergency situations. Even just $100 a month goes a long way if you are consistently setting this cash aside every month.
7. To pay for your wedding expenses. If you use a credit card to finance your wedding expenses, you may have a tendency to go over your budget because you are not seeing the cash leaving your wallet. You do not want to start off your marriage with thousands of dollars in debt, so be sure to pay cash for your wedding expenses. If you do decide to finance some portion of your wedding expenses, you should consider a personal loan as opposed to using your credit card. As we previously mentioned, a personal loan can have a lower interest rate if you have a good credit score. Interest rates can be as low as 5% on a personal loan if you have excellent credit.
8. To finance an impulse purchase. It may be wise to implement a household rule that you always “sleep on it” for purchases over a certain dollar amount. For example, if you are out shopping and you see a $500 pair of shoes that you feel the impulse to buy, you could decide to “sleep on it.” The next day you may decide that you did not want those shoes all that much after all, and they were not worth financing.
9. To make purchases at a flea market or a foreign website. If you go to a flea market to buy some vintage car parts, and the vendor offers to take your credit card on their cell phone or other mobile device you may want to pass them up on this offer. Similarly, if you are looking to make a purchase on a foreign website and you don’t know their reputation you may want to pass on using your credit card. If you really do not want to pay cash at the flea market or you must purchase from this foreign website, you should invest in a prepaid debit card. This is much safer than giving an untrusted source your personal credit card information.
10. To pay for tuition. While a credit card interest rate may be as high as 20%, a student loan interest rate can actually be as low as 1-2%. You would be making a huge mistake financing your education on a credit card rather than seeking out student loans. Some student loans also have the distinct advantage of being government-subsidized, with long-term debt repayment options and deferment options.Deferment allows you to wait a certain period of time after you have completed your education to start repaying your student loan debt. There are also options that would allow you to lower the interest rate for a certain period, lowering your payments and making the debt easier to bear.

There are many times that a credit card is a welcome addition to your wallet, and when used wisely it can help you build good credit and manage expenses effectively. On the flip side, there are times when it is extremely irresponsible and unwise to use your credit card for financing. If you avoid these ten scenarios, your wallet and credit score will thank you in the long run.