Five Credit Card Purchases You Must Avoid

By Mike Peterson
In March 24, 2011

Most of my readers probably know I’m not a huge fan of credit cards – in general, I believe it’s better to save up and pay cash instead of racking up hefty credit card bills.

In some cases, though, credit cards make sense.  For example, some folks charge big-ticket items like large appliances to earn reward points, get cash back, or earn airline miles.  Others like to keep their cards active by making – and paying off – one purchase per month.  There’s nothing really wrong with either of these strategies if you’ve got the cash to pay your credit card balance off – in full – every month.

When used responsibly, there’s nothing wrong with credit cards.  But the key word is “responsibly.”  Pay your balance in full at the end of the billing cycles.  Treat your credit cards like cash – meaning, if you don’t have the money, don’t spend it.

And if you really want to make sure you don’t end up with mounds of high-interest debt, steer clear of these types of high-risk purchases and activities:

1.    Gambling. Somebody’s gotta win, right?  Sure.  And if you’re using plastic to hit the casinos or play online Texas Hold’em, guess who’s taking home the jackpot?  Your credit card company.  Remember: gambling is just that – gambling.  There’s no guarantee that you’ll win any money.  The odds are better that you’ll just walk away a little deeper in debt.

2.    Tuition. There’s only one thing worse than graduating college with thousands of dollars’ worth of student loan debt.  Graduating college with thousands of dollars’ worth of credit card debt is much, much worse.  Instead, look into grants (you don’t have to pay them back) and apply for scholarships.  If you still can’t swing it, ask a family member for a loan or apply for financial aid – the interest will be lower.

3.    Cosmetic surgery. Cosmetic procedures are costly, and they’re not medically necessary.  That means there’s no good excuse for using your credit card to pay for a face lift or tummy tuck.  Besides, worrying about high-interest credit card debt causes frown lines.

4.    Event planning. Your dream wedding isn’t worth a credit nightmare.  Neither is your 25th wedding anniversary, your daughter’s sixteenth birthday, or your son’s high school graduation bash.  It’s tempting to go all out when planning a special celebration – but it’s not worth going into thousands of dollars in debt.  Set a budget.  Pay cash.  And remember that it’s the thought – not the price tag – that counts.

5.    Taxes. Tax time is fast approaching, and if you end up owing Uncle Sam this year, it may be tempting to use your credit card as a quick fix.  Resist that temptation – you’ll be glad you did. Pay cash, or – if you’re a little short on funds – set up a payment plan.  The IRS’ interest rates are much more reasonable than your credit card’s rates.

Bottom line: Use credit wisely.  Don’t charge things you can’t afford.  Don’t buy things you don’t need.  If you stick to these simple guidelines, you’ll find yourself on the path to financial freedom and a debt-free future.  Happy saving!

Mike is the author of “Reality Millionaire: Proven Tips to Retire Rich” and he has been published in a variety of local and national publications including Entrepreneur Magazine, Deseret Morning News, LDS Living Magazine, and Physicians Money Digest. He holds a B.S. in business administration from the University of Phoenix.