When not to Use a Credit Card: 5 Times You Shouldn’t Pay With Plastic

Jun 23, 2022 2 min read

There’s no doubt that using credit cards make life easier. When everyone from the flower vendor at the farmers market to your favorite food truck accepts plastic, it seems like a no-brainer to use your card for everyday purchases. While earning airline miles and cash-back with credit card use is a definite perk, there are times when those perks — and the convenience — of paying with a credit card don’t outweigh the drawbacks.

When You’re Making an Expensive Purchase

You might be tempted to reach for your credit card for certain big-ticket items. There can be benefits to charging a new TV or couch, but make sure you have a plan to pay off these high-dollar purchases.

Think of your credit card as an unsecured loan with accrued interest on the balance if you don’t pay it each month. A good rule of thumb is that if you can’t afford the entire balance, then you should at least be able to pay off half the purchase within a month of the charge. You should then have a strategy for paying down the other half within six months. If this isn’t doable, this is the perfect example of when not to use a credit card. Save up and use cash instead.

When You’re Out on the Town

If you’re enjoying drinks with friends at a restaurant or bar, think twice about using your card to pay. In addition to running up a tab that you might not be able to afford, you may encounter an unscrupulous waiter with a skimming device that can steal your card information. It’s always safer to pay with cash if there’s a chance your card will be out of sight.

When You’re Nearing Your Credit Card Limit

Have you received a notice about the rates on your card increasing? It’s possible that your introductory annual percentage rate (APR) is almost up, but it’s also possible you’re nearing your credit limit. A rate increase is a warning from the credit card company that they’re trying to deter you from using your entire spending limit. Work to pay down your debt before adding more charges to your statement.

When You’re Trying to Build Credit

If you’re using your credit card to build your credit, know that if you carry a balance from month to month, using your credit card could have an adverse effect on your credit score. A credit score is a prediction for how likely you are to pay your bills based on your history of paying bills and using credit responsibly. This is especially important to keep in mind if you plan to apply for a mortgage within the next six months to a year.

When You’re Paying Your Taxes

Yes, you can pay taxes with a credit card. But should you? The pro: You can delay payment by 21 days. The con: Paying your taxes with plastic isn’t free. In fact, the credit card fees can top out at 2.35% of what you owe on your scheduled payment. If you opt to pay with an integrated IRS e-file and e-pay service provider, the fees can go up to four percent.

Protection You Can Trust

Credit card numbers are the target of many scams. Consider adding ID Theft Protection for an added layer of security.

Want to learn more?

Contact a local FBFS agent or advisor for answers personalized to you.