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:
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.
You might remember from years ago something called postal mail.
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.
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.
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.”