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

There’s no doubt that using credit cards can 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.

But using your credit card isn’t always the smart choice. While earning airline miles and cash-back with credit card use are definitely perks, there are times when those benefits — and the convenience of paying with a credit card — don’t outweigh the drawbacks. Whether or not you’re a first-time credit card user, you should protect yourself by steering clear of the cons of credit cards in these five situations.

1. When You’re Shopping on Unsecure Internet Sites

You can sometimes find steep discounts online, and free shipping makes it tempting to hit “add to cart” rather than heading out to brick-and-mortar stores. But before clicking the “confirm order” button, make sure you’re browsing a secure website.

How can you know? The website’s address should start with https:// instead of http://. The “s” indicates that the site is encrypted and secure, so your credit card information and personal data should be safe from hackers trying to steal your information.

Another tip: Take a second look at the URL. Does the site address make sense, or does it appear as though it’s coming from an untrustworthy source or a foreign location? Unless you’re confident that the online store is legit, it is best to avoid using your credit card on sites with addresses containing a country code such as .tk (Tokelau), .cn (China), .ml (Mali) or others you don’t recognize. Of course, there are plenty of shady online stores that end in .com, .shop and .net, too.

Watch for too-good-to-be-true deals as well. If you’re shopping for a pair of running shoes and the price ranges from $100 to $125 on trustworthy sites, be suspicious about finding them for $40 on a site you’ve never heard of.

1. When You’re Making an Expensive Purchase

You might be tempted to reach for your credit card for certain big-ticket items. And sure, 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. 

Credit card interest rates are averaging close to 25%. So, if you can’t afford to pay off the balance quickly, you’ll end up paying a lot more for that expensive item. It’s smarter to save up until you can afford it. 

When should I use my credit card? If you get benefits from using a credit card, like cash back or an extended warranty, go ahead and pull out the plastic — just make a payment right away with the cash you’ve saved up to cover the cost.

1. When You’re Out on the Town

If you’re enjoying dinner or drinks with friends at a restaurant or bar, think twice about using your card to pay. Going into the night with the mindset that you’re paying in cash can help you rein in your spending.

Plus, restaurants and bars are places where the server generally takes your credit card out of your sight when you pay your bill. That’s one of the disadvantages of using credit that puts you at risk. They might use a skimming device to steal your credit card data and use that data for purchases. 

While you might not be responsible for these fraudulent purchases, reporting them and replacing your card is a hassle. It’s always safer to pay with cash if there’s a chance your card will be out of your view.

1. 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 you may also be getting close to 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. If you go over your credit limit, along with a higher interest rate, your credit card company could lower your credit limit, require higher minimum payments or even cancel your card. Work to pay down your debt before you add more charges to your statement.

1. When You’re Trying to Build Credit

If you’re using your credit card to build your credit and you carry a balance from month to month, you could be lowering your credit score. Your credit score predicts how likely you are to pay your bills, based on your payment history and your responsible credit use. 

It’s always a good idea to keep your credit score as high as possible. So, pay off your credit cards every month or keep the balances to a minimum. It’s especially important to keep your credit score as high as possible if you plan to apply for a mortgage within the next six months to a year, since a better credit score may qualify you for lower interest rates.

Add a Layer of Protection for Peace of Mind

Paying with plastic can make life easier — but it’s important to know when not to use a credit card. If you’re worried that your card numbers may be at risk, consider adding ID Theft Protection to your homeowner’s or renter’s insurance for an added layer of security.