When Not to Use Credit
Credit card debt is a huge issue all over the world. While some people may find themselves in debt for good reason — like an unexpected emergency expense — others are just using their plastic when they really shouldn’t be.
We all know that putting everything on plastic isn’t a good idea, but there are certain circumstances when you really shouldn’t be relying on your credit. By avoiding using your credit card in these situations, you will be able to avoid some serious credit problems in the future.
So, here’s the lowdown on when not to use your credit card…
To Finance Your Start-Up Business
Many of us have dreams of starting our own business someday, and there is nothing wrong with that (in fact, it’s very much encouraged!). However, putting all of your expenses on credit in hopes that you will be successful is a gamble of epic proportions.
Sure, there are some entrepreneurs out there who put everything on credit and end up paying it all back in no time thanks to the quick success of their businesses, but the reality of the matter is that this doesn’t happen very often. In fact, you will undoubtedly have to weather financial storms if you are serious about running your own business.
So instead of tying your business expenses to your credit score, consider finding investors, or look into relatively low-cost businesses like freelance writing or web design.
When You Already Have Too Much Debt
If you already find yourself in the hole, there is absolutely no reason to dig yourself any deeper. If you don’t get a handle on your spending, your debt could spiral out of control, and believe me, no one is happy when that happens. Avoid putting things on your credit card; those morning coffees can really add up and make it more difficult for you to pay off your debt.
On a similar note, nothing will get you in debt faster than using your credit card to pay off another card or loan. You would have essentially put yourself in debt in an effort to pay some debt off. It’s downright illogical, when you think about it mathematically.
When Your Purchases May Be Morally Questionable
Believe it or not, credit card companies can actually restrict what you buy. A recent article from SmartMoney, a financial blog belonging to the Wall Street Journal, revealed that credit card companies like American Express do not approve transactions on purchases of medical marijuana, even if it’s legal. Other card companies may also restrict you from buying gambling chips and making donations to a controversial charity. You can also forget about anything remotely resembling online pornography!
Credit card companies like American Express, Visa, and MasterCard simply argue that they prohibit purchases with high levels of dispute. Whatever the case may be, if it’s morally questionable, avoid putting it on plastic.
For Small and Basic Purchases
It’s one thing to put recurring monthly purchases on a credit card and then paying off the card in full every month. By knowing your fixed costs on your card each month, you can make sure to accommodate your budget and build good credit.
However, it’s an entirely different thing to put small purchases like lunches and basic necessities (for example, socks!) on a credit card. Without keeping track of these purchases, they can really add up and make it difficult for you to pay off your debts.
Using your credit wisely can ensure your financial stability and even help you build wealth. By avoiding using credit in the aforementioned situations you will be one step closer to getting a handle on your credit and your financial future.
Image by Cheong Fong Liew
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Spending on credit cards is easy to do! One thing that I have found that works is avoid getting department store cards. If you cannot afford to pay cash for the item that you want then you shouldn’t buy it.