If you’re someone who diligently pays off your credit cards every month, swiping that plastic for most of your purchases makes quite a bit of sense. It’s undeniably convenient, offers the chance to accumulate rewards, and provides solid safeguards against any fraudulent activity.
However, there are specific instances where reaching for your credit card could be a misstep. Let’s discuss three purchases you should avoid making with a credit card.
1. Lottery Tickets
In some places, buying lottery tickets with a credit card is perfectly fine, while others restrict it. Yet, even when it’s allowed, it’s wise to steer clear.
Purchasing lottery tickets with your credit card is usually classified as a cash advance by your credit card company. This happens because your ticket holds the potential to be instantly transformed into cash if you hit the jackpot.
Why dodge cash advances? Well, for starters, you’ll incur a cash advance fee, normally ranging from 3% to 5% of the transaction. The moment you make the purchase, interest typically starts accruing, and often, the APR is higher than standard rates. Plus, don’t expect to earn any rewards. While a little gambling can be enjoyable, it’s best to pay for your lotto or scratch-off tickets with either cash or a debit card.
2. Cryptocurrency
Certain trading platforms make it possible to purchase cryptocurrency using a credit card. Yet, be prepared for this transaction to also be treated like a cash advance since cryptocurrencies can swiftly be converted to cash.
Apart from the typical drawbacks mentioned earlier, you might face additional pitfalls: platforms might impose a credit card transaction fee, often around 2% or 3%. Plus, given the volatile nature of cryptocurrencies, their value can plummet quickly. If you’re unable to clear your credit card balance promptly, you could end up with a double whammy: a depreciated investment and high-interest debt. Cryptocurrencies are already risky bets; there’s no need to complicate matters further with a credit card. It’s usually best to use funds from your savings or checking account instead. Interested in a fee-free crypto purchase? Consider exploring our recommended cryptocurrency exchanges.
3. Medical Care
The sheer cost of medical care in the U.S. often leads people to resort to credit cards, and that’s understandable if you can settle the balance in full immediately.
Relying on a credit card just because you can’t cover the expense upfront could set you up for a financial struggle, weighed down by high-interest debt that lingers for years.
Before swiping your card, consider these steps: scrutinize your medical bill for accuracy, as mistakes and unwarranted charges do happen. Discuss any unclear charges with your insurance provider to ensure you’re fully covered. Additionally, negotiate with your healthcare provider for possible discounts or interest-free payment plans. If your credit is good, a personal loan with a more favorable APR than a credit card could help cover your medical expenses.
Those holding strong credit scores might qualify for personal loans boasting APRs as low as 6.99%. Check out our curated list of the top personal loans to see if you’re eligible. Moreover, if paying off medical debt remains a challenge, you’ll find some breathing room before it impacts your credit score. Medical debts only appear on your credit report after 365 days past due, and debts under $500 don’t get reported. In contrast, credit card debt can show up quickly—just 30 days past due.
A Credit Card: A Double-Edged Sword
I personally appreciate using credit cards. They offer me numerous discounts and the points and miles I accumulate translate into significant yearly savings. However, accompanied by this convenience is the temptation to use them for nearly everything, almost as second nature. Before you instinctively reach for your card, consider whether you’re inadvertently accruing unnecessary fees or potentially knee-deep in avoidable debt.
