Card Sharks: How To Know When To Skip Using Credit Card

Credit cards, for all the flack they get, aren’t all bad.

In fact, when you use them correctly, you actually can have them work for you, rather than against you.

Case in point, for all those holiday shoppers who decided to use a credit card to earn extra savings on gifts, you most likely did pretty well with taking significant amounts of money off your bill.

What happens in the next 30 days is another story, however, when ultimately determining if the credit card was used correctly. Are you paying off the bill in full in the next 30 days to avoid interest? Doing so is a two-fold, winning approach because not only do you save money on items you bought but you don’t accrue any interest on top of that initial purchase.

And that is a perfect example how to use a credit card correctly.

But that doesn’t mean you don’t have times when you shouldn’t use your credit card at all, not ever and forgetting about these scenarios means you put yourself in financial situations that are hard to crawl out of consistently.

Credit cards can be used correctly in the above situation, but also they’re fine for earning miles and points and what have you as well (again if it is paid in full within 30 days). Other scenarios include using credit cards when you have no other resort, and the cash on hand needed just isn’t available.

Credit cards should also never be used to tie back to something that isn’t tangible. If you’re using credit cards for these three reasons, you’re misusing them.

For starters, vacations are off limits as far as credit is concerned. There is nothing about a vacation that can be drawn back to credit cards and the debt. Also, credit cards should never be used for paying bills or food, whether that’s groceries or eating take out from time to time.

Again, it’s about nothing tangible to show for it. Not to suggest that using a credit card for a new computer is a good idea but it’s certainly easier to justify than borrowing money for a trip or flight.

In the end, credit cards are a stand-in for ethical decision making. You should have money saved and be able to skip the plastic altogether if you aren’t overdoing it on expenses and have money left after you’ve paid all your bills.

If you absolutely must use a credit card, do so correctly and with extreme caution.