Avoid Paying for THIS with Plastic

Avoid Paying for THIS with Plastic

Avoid Paying for THIS with Plastic

When used properly, a credit card can be an integral part of your financial arsenal. The big caveat here is the word properly. Credit cards used improperly or recklessly can spell certain financial ruin. There are numerous ways to fall victim to this. One is to use your credit card in situations you flat-out can’t afford. If you can’t turn around and pay off your balance once you’ve made a credit card purchase, you shouldn’t be buying that item.

Of course, there are instances when you’re hard-pressed for cash and turning to your credit card can be tempting. But there are some circumstances when you should do everything in your power to avoid using plastic.

Risk 1: Gambling

There are many pitfalls to gambling – just consider the famous phrase “The house always wins!” Whether it’s buying a couple of scratch tickets at the convenience store or playing hours of poker at the casino, gambling is designed so that the house (the state lottery division or the casino owners) profits, even if you hit it big. But here’s the thing: The odds are stacked against you. You can get swept up into the action, and easy access to funds via your credit card can feel like an unlimited resource at the moment.

As a general rule, don’t gamble unless you can pay for it in cash. If gambling is your fun leisure activity, create an entertainment “allowance” that gives you a set amount for the activity, and only use cash – once your allowance is used up, push in your chair and go home.

Risk 2: Wedding Expenses

When you’re planning for The Big Day, the wedding mindset that dictates only-the-best-will-do perfection can lure you into paying exorbitant sums. Think about this: The average wedding in the U.S. these days tops $26,000. If you don’t have a budget – and track all your expenses carefully back to that budget – you can wind up overspending. And a credit card only facilitates this overspending because of the convenience of the plastic.

Why start your married life under a cloud of wedding debt? Consider the challenge of setting up a wedding fund before you set the date. Both partners can contribute to the fund until it reaches the set goal. When you hit the target, you know you’re ready to walk down the aisle.

Risk 3: Medical Bills

Unlike a gambling spree or a lavish wedding, medical bills are something you have no control over. If your healthcare costs are minimal, and you have the money to pay off the credit card balance immediately, go ahead and break out the plastic. But if you get socked with large, unexpected doctors’ fees, don’t put that gigantic payment on your credit card. The interest rate you accrue will make your already-astronomical medical bills even bigger. And if you’re coming through a health care crisis, the last thing you need is the stress of additional interest and fees.

Instead, contact your healthcare provider to work out a payment arrangement. These days, many hospitals, medical facilities, and health insurers offer payment plans to help you manageably meet your obligations. All it takes is a phone call – and many providers allow you to set up plans online. Many are fee-free, but even if your provider charges a fee, it will most definitely be less than the interest you’d face on your credit card statement.

(Here’s where we also need to remind you about your emergency fund. If you don’t have one, set up a separate savings account TODAY that ideally holds enough money to cover several months’ worth of living expenses. That will help you avoid resorting to your credit card to pay for those unforeseen emergencies.)

Risk 4: Tuition

With the skyrocketing costs of college, it’s no wonder that many students can’t cover their tuition outright. Without the necessary cash at hand or funds in your bank account, you might think that a credit card payment is the best method. Think again! Some universities won’t even accept credit card payments (which you’ll appreciate later). And even if yours does, you’ll likely be assessed a convenience fee that, while “minimal,” still adds up.

avoid paying tuition with credit

Investigate other financing options. Contact your college financial aid office, or fill out the Free Application for Federal Student Aid (FAFSA) form online to see if you’re eligible for any scholarships and grants. The annual percentage rate (APR) on student loans is much more favorable than your credit card – we’re talking 4-7% vs. 19-25%.
If you’ve fallen victim to any of these spending pitfalls, know you’re not alone! These are common mistakes that many credit cardholders make. Now’s the time to rectify your situation. Start by reaching out to one of the friendly team members at American Credit Foundation. We’ll work with you to make sure you understand what went wrong with your credit card strategy and what to do to prevent a recurrence.

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