The ease of using a credit card makes it tempting to swipe plastic for even the most trivial expenses. However, unless your bank balance is growing at the same rate you’re charging purchases on your card, you may be in for a rude awakening when your credit card bill arrives.
While there are plenty of perfectly good reasons to use a credit card — travel, emergencies, rental cars — there are times when you may have other lower-interest options to choose from.
Student Costs
One of the rites of passage when going to uni is getting a credit card. But if you’re using your credit card to charge your educational expenses, such as tuition, fees, books and other school-related costs, you could be setting yourself up for debt trouble before you even graduate. It doesn’t take long for the costs associated with attending university to reach the five-digit range, or even higher.
If you’re having trouble meeting your financial obligations for university, consider taking out a student loan to pay the costs of uni. The interest rates are lower than those associated with credit card bills, and the monthly payments are lower, as well. Better still, you won’t be required to repay most student loans until after you’ve graduated, which gives you time to establish a career before you start paying back your loan.
Wedding Costs
The wedding industry is growing by leaps and bounds, with even many of the more conservative brides and grooms spending thousands of dollars on their nuptials. If you can afford it, that’s great, but if you plan to pay for your big fat expensive wedding by putting it on plastic, it’s time to rethink your idea of the perfect wedding.
Going into serious debt for a wedding can not only destroy your finances and your credit, it can also destroy your new marriage. Adjusting to married life is difficult enough without adding crushing debt to the list of changes you’ll be required to adjust to. If paying outright for the wedding of your dreams is out of the question, consider scaling your wedding back, or delaying the date until you’ve saved up enough to pay for it.
Vacation Costs
You’ve spent hours checking airfare websites, looking for the best deal. You’ve compared rental cars and hotels, trying to save money wherever possible. If you plan to charge the costs of your vacation to a credit card you cannot pay off in the short-term, then you’ve wasted your time searching for the best travel deals — the interest you’ll pay on your charges may eat up any savings you may have realized, and add back some more costs, as well.
Credit cards are often touted as the preferred method of paying for the costs associated with travel, such as airfare, rental cars, hotels and meals. However, that’s assuming that you have the ready cash to pay off your credit card in full as soon as you return from your trip. And don’t over-use the rationalisation that you’ll be earning airline miles or other credit card rewards, because unless you can repay your charges soon, those rewards are worth much less than the interest you’ll be paying.
There are times when using your credit card is the wisest course of action, but in some situations, you’re better off looking for an alternative way to pay, especially if you’ll be unable to pay your credit card off in a matter of weeks or months.
Image by Shelley Panzarella
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