Four Places Not to Use Your Credit Card

Americans are in love with credit cards.

Many of us have replaced the cash in our wallets with our cards, charging everything from a cup of coffee to large purchases like automobiles.

Although credit cards are convenient, they aren’t right for all purchases even if you can get rewards points or cash back.

In what cases are credit cards a bad idea?  Here are some places NOT to use your credit card:

Cold Calls

If you’re a savvy consumer, you might wonder why anybody would actually buy something that comes from a sales pitch on the other end of a cold call.  In fact, the reason the call calling business is still in business is because a lot of consumers do respond favorably.

You don’t have to admit it, but if you have said yes in the past, say, “no, thank you” the next time you get a call.

Not all of these companies are out to pull a fast one on you but many of these are scams and you have no way of telling the difference.  If you give the wrong company your credit card, you may become a victim of identity theft.

If you’re truly interested in the offer, have them direct you to a website where you can do more research.  Or better yet, look them up yourself.

Snail Mail

places not to use your credit card

I love my credit card but there are places I don’t use it. How about you?

You might remember from years ago something called postal mail.

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This person in blue would show up and deliver envelopes to you, many of which were bills.  Today, those bills that come through the postal service often give you a place to write your credit card number in order to pay.

Don’t do it.

Once you write it down and send it, it passes by the eyes of an unknown amount of people.  What if they grab it and use it or sell it to somebody else?

If you want to pay by credit card, do it online.

Taxes

The IRS will gladly take your money in any form they can get it and that includes your credit card.

Seems like a great idea, doesn’t it?

You could stick it to the tax man by paying with your credit card and use the rewards points to take a trip to the Bahamas.  That might sound like a good idea but the IRS isn’t going to foot any of the bill for your taxes so the money they have to pay to the credit card company is added as a transaction fee when you pay with your card.

A Car Loan

Here’s your plan.  Open a credit card account with the one year introductory rate and charge your new or used car to the card locking in a rate that is lower than a conventional car loan.

You’ll easily be able to pay it off before the higher rate kicks in.

Even if the dealer allows you to do it, there are some problems.

First, are you sure you’re going to be able to pay it off before the year is up?  Many people before you have said they would and failed.

Second, with variable rate cards, you don’t know what the rate will be once the introductory rate expires.  It would be better to get a conventional loan and pay it off early instead of risking the sky-high interest rate of a credit card.  If you pay the conventional loan off within a year, you won’t pay an unreasonable amount in interest, anyway.

Check your local credit union for a car loan that doesn’t charge a prepayment penalty.

Finally

Credit cards are only consumer friendly if you never have a balance.

As soon as you let the balance start collecting interest, you’ve allowed your finances to be infected by the largest wealth destroyer available to you.

Credit cards can be a great tool, but if you aren’t careful you’ll be the “tool.”

What other places should you not use a credit card?  Let’s see some uncommon places in the comments!

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Published or updated April 13, 2013.

Comments

  1. Great article! Another thing to watch out for: Phone scams. Just the other day my boyfriend got a call from ‘Banana Republic’ about how he’s missing a payment on his BR card when in reality, he hadn’t used it in months!

    • Scary stuff. I can’t tell you how many times I’ve gotten emails like that saying an account was limited or suspended, sometimes for accounts I don’t even have!

  2. Another one that can kill you are the silly balance transfer fees. Some banks allow you to complete an instant transfer from your credit card directly to your bank account. Not only are the fees going to kill you, the interest rates are outrageous!

  3. I use credit cards to pay medical bills via snail mail. Fortunately, I’ve never had an issue, but it never occurred to me that it could be a risk.

  4. Great post.

    The only thing I’d throw out there are that credit cards can still be unfriendly even if you don’t carry a balance. The stats show that people who buy with credit spend 16-18% more than people who pay with cash.

    Still…if you’re disciplined, there are perks to credit cards.

    • I’m not really trying to argue whether they are good or bad here (I’ve done that in other posts). You just need to know there are certain times it could be tempting to use them when you should really restrain yourself.

      As for spending more, it depends on the person. I’ve found that if I have too much cash on me I’m tempted to spend it.

  5. Charles@Familyancial says:

    Excellent tips. I try to use credit card as many opportunities as possible. But your list made me a little more cautious. It’s true about the IRS transaction. There are some transactions that will come up as a cash advance so you have to be very careful with those. Been there and done it.

  6. Being a convenience user can be tricky, like juggling flaming torches. Convenience users need to be super disciplined. There’s nothing convenient about being the tool.

  7. J Angellar says:

    I do not make any donations to 501c3 organizations by credit card since I got a charge from an organization I never heard of on my card. It turns out that the organization that appeared on my card processed donations for the organization I was donating to. Except it was in California and my organization was located on the East coast. And I wonder if any of the smaller ones use volunteers to process the donations. Better safe than sorry.

  8. Jenna, Adaptu Community Manager says:

    While using a public wifi account…

  9. Great tips. I can’t imagine giving a CC# to someone cold calling. The snail mail aspect is one that I don’t do, but I’ll bet some people still do – which poses risks that you mentioned.

    • I wouldn’t imagine giving my CC# to a cold caller either. But I’ve gotten tons of calls asking for this and that and most talk faster than a red-lined Ferrari. I would imagine just enough people fall prey for the cold calling to still exist.

  10. Great points. My only other contribution to note is that you shouldn’t use your credit card just anywhere on the Internet. From time to time I’ve found deals that were too good to be true – and so I’ve avoided them altogether! But I can see how these sites could easily attract the computer-illiterate types.

  11. I have noticed a lot of non profits calling lately asking for donations, with the credit card, of course. It is a household policy here to never give financial info over the phone, so the answer is always no. But I am sure they are getting the info from some people. Whether it is legitimate or not, it’s just too risky.

    Ashley

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