Thursday, March 16, 2006

What not to buy with a credit card:

The following items are things that you should not be using a credit card to purchase. After you read them, I will explain why it is a bad idea:

1. Groceries
2. Gas
3. Coffee
4. Fast Food
5. Restaurant Bills
6. Tobacco Products
7. Alcohol
8. Gifts
9. Rent
10. Utility Bills (electricity, Heat, Cable, ect.)

Why is it such a bad idea to use a credit card on these things? None of these items hold any value! Groceries, gas, and tobacco products will all be gone within a week or two, why would you want to be paying them off for months? If you are going to take time to pay something off, and pay extra for it via interest, you should at least still have it in your possession while you pay it off. Coffee, fast food, restaurant bills, and alcohol fall under basically the same thing, but they are gone even faster. Why would you want to pay interest on your medium mocha latte grande what ever it is from Starbucks, or take 4 months to pay off a 99 cent cheeseburger from Wendys?

"What about gifts, why can't you put them on your credit card? The stuff I buy my ____friend is expensive!" So why shouldn't you put them on your credit card? Once you give the gift to your significant other, it is not longer yours, and no longer holds any value for you. The person you gave it to may love it, or be able to pawn it and get money for it, but you will never be able to. It is basically the same as the choco latte mini with cream you got from Starbucks yesterday (Can you tell I don't like Starbucks yet?). Don't be paying for a necklace for 6 months after you gave it to someone.

Rent and utility bills are the worst things to be putting on your credit card. You have already used the service up and now you are going to pay for it over time and pay interest on it? If you can't afford to pay cash for your cable every month, cancel the cable. If you can't afford to pay your rent, it's time to start looking for cheaper places to live. If you use up too much electricity, turn the lights off when you aren't in a room, or buy energy saving light bulbs. You shouldn't have to pay interest on your cable bill, it already costs too much to have cable.

So there has to be some exception to this right? I mean, I am special so I can use my credit card to do this right? Well there is really only one way where it is okay for you to use a credit card to buy these things, and that is if you pay the credit card off completely every month. This way you never get charged any interest. However if there is ever a single month where you don't pay off the card in full, it's time to stop using the card. Don't make excuses, or say next month will be better, just stop using the card. This is how people get into trouble and it's a good way to piss all your money away on paying interest charges.

Say no to credit card balances!


At 4:11 PM, Blogger James said...

Why not just set up the card to be automatically paid off every month on the due date? This is what I did, and when I buy something I am aware that I will be automatically paying for it at the end of the month so I stay within my means. If they are paid off evey month and used only for things one would buy anyway, credit cards are a great way for young people to build credit. You can even get some cool free rewards, like cash back on every purchase. For these reasons, I use my credit card for everything!

At 8:54 PM, Blogger Mike said...

Not all cards let you set up automatic payments. I can set up my card to take money out of my checking account, but I have to do it every month. Most college students don't get cards with very good rewards either. Stay tuned for great things to use your card for as well....

At 9:02 PM, Blogger Jonathan said...

Hmm this is very interesting. I've just started college and am just starting to learn about personal finance. I must say though that I consider myself a bit spoiled, I don't work and I have two credit cards which were given to me by my parents (my name is under their accounts) to build up my credit. What you explained makes a lot of sense, but my mom tells me to use the credit card for everything because of the rewards. Should I stop using my credit cards?

At 9:25 PM, Blogger Mike said...

If you or your mother is paying the cards off every month then by no means do you need to stop using them for purchases. This is more geared towards people who buy stuff on their card and take months to pay it off, or never end up paying it off because they always put stuff on it. As I said at the end of the article, if you are paying it off every month, then by all means use it. You are better off because you have rewards available to you, most cards that college students are getting do not have any reward besides a high interest rate.


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