If you have or are interested in getting a credit card, it is essential to understand your needs, what the card can offer and of course, what you shouldn’t put on your credit card. Different financial service providers offer many different types of credit cards with different terms and conditions, different interest rates and different benefits and disadvantages.
Your credit card serves the purpose of enabling you to buy things right now that you could not afford without saving for a few months first. There are, however, certain things that should never be purchased with a credit card. You should make sure you clearly understand what to pay for your credit card with and what to avoid. This could save you a lot of trouble in the future.
But surely I can buy anything with my credit card?
It is true that almost any retailer, restaurant and service provider will accept your credit card as payment, but it does not mean that you should use it every time. The mantra ‘just because you CAN does not mean you SHOULD’ is definitely one to remember when you are carrying around that dangerous plastic card. Every time you make a purchase on your credit card you should consider several things:
- Am I making this purchase because it is convenient?
For travel and business expenses credit cards are great. Your credit card will allow you to spend your money in a foreign currency almost anywhere in the world without the trouble of having to exchange cash in person. You will also be able to draw foreign currency off of your credit card to make your travelling experience even easier and more convenient. If the company that you work for needs you to travel or to take clients out for dinner, a credit card is a great way of paying for expenses without having to carry company cash around with you and then working everything out later.
- Am I making this purchase to grow my credit record?
If you are making a purchase on your credit card in order to help grow your credit record, it might not be a bad idea. Having a good and healthy credit record will enable you to get a home or vehicle loan later on with low interest rates.
- Am I making this purchase because the retailer or service provider only accepts credit cards?
In some cases, using your credit card is unavoidable. Most car rental businesses will only accept payment through credit card and many airlines will only allow you to pay online using your credit card.
- Am I making this purchase because it is something that I or my family really need?
If you are using your credit card to purchase something that is really essential to your life but that you cannot afford right now, then it still might be a good choice. As long as you can afford to pay the item off relatively quickly, there is no reason that this will not work for you.
- Am I making this purchase on my credit card because I don’t have enough cash on me?
If you are making a spur of the moment purchase; a new pair of shoes for example; then you should think twice about putting it on your credit card. If you cannot afford it right now, and if you do not really need it, then you should not clutter up your credit card bill with it.
Another thing to avoid putting on your credit card is your bar tab. It may be very easy to spend more than you normally would on drinks when you are paying with your credit card. Avoid drawing money with your credit card, as unlike with other purchases, cash withdrawls are charged interest from the moment you make them. Luxury items should also be avoided.
Too many people view their credit cards as a ticket to the high life. Using your credit card this way will only result in a lot of debt that you cannot afford to pay.