5 Things To Never Buy on Credit

Using a credit card is a little bit like playing with fire. Stick your hand too close to the flame and you will get burned. Credit cards can be a useful tool in your financial toolbox. If managed carefully, a credit card offers freedom to make necessary purchases when you lack sufficient cash on hand. Misusing a credit card can erase your financial freedom in a short time.

Credit card debt is unsecured and carries a higher monthly interest rate than a typical auto or home loan. It is also not tax deductible. A few missed payments and reckless spending are all you need to send credit card debt spiraling out-of-control.

Making smarter credit card purchases starts with leaving these five types of purchases off your card:

1. College tuition

Using a credit card to pay college tuition creates an unnecessary burden. Interest rates for credit cards are much higher than a typical student loan. Any college student can tell you that paying tuition without some form of financial aid is nearly impossible – which means credit card interest will increase to a staggering amount long before you graduate.

Students can find much better options for paying their tuition. The Federal Government offers Pell Grants for students from low and middle income families. These grants help cover tuition costs and do not need to be repaid after graduation. Students can also apply for federal work study programs which offer part-time on-campus jobs to help pay for school expenses.

If you don’t qualify for these programs, or need additional funds to cover college expenses, private student loans offer another good option. You can obtain these loans through your school or a local financial institution. Such loans must be repaid after graduation, but carry a much lower interest rate than credit cards do.

2. Wedding expenses

Getting married is a special moment in your life. You don’t want to ruin the beauty of that day with a ton of burdensome debt.

Planning a wedding is never cheap. Doing things like hiring a photographer, reserving a space, catering food and buying a wedding dress quickly drain your wallet. Still, you should never stash away those bills on your credit card. The price tag can make it virtually impossible to pay off the balance in a timely manner.

Find inexpensive options where you can cut costs on like invitations. Plan a wedding budget based on your current income and savings and stick to it. Throwing a lavish ceremony is never worth burdening your new marriage with credit card debt you can’t easily erase.

3. Vacation expenses

Getting away from the stresses of everyday life is part of what makes vacations so appealing. Vacations are not much fun, though, if you finance everything with a credit card. It only creates cumbersome debt that’s difficult to erase.

There are many ways you can fit a vacation in your budget. Choose less expensive travel destinations. Look for deals on lodging on sites like LivingSocial or stay with family and friends. Begin setting aside money several months ahead of your planned vacation so you have a large enough fund to cover all your expenses.

4. Income taxes

Owing taxes to the IRS can create a financial quagmire all on its own. Charging tax payments to a credit card can only compound those problems. High interest rates and payment processing fees can make paying off a balance from back taxes difficult.

There’s simply no need to do it in the first place. The IRS will let you set up a monthly payment plan with a much lower interest rate. IRS monthly rates hover around 3 percent – which is far lower than even the best credit card on the market.

5. Luxury items

Really itching to buy the latest electronic gadget or redo your living room with new furniture? Putting it all on a credit card to pay off later is an awful idea.

Piling electronics, appliances and other high-end purchases onto a credit card should never be done when you cannot afford them in the first place. If you cannot pay luxury goods off on time, it damages your credit enough to prevent you from obtaining even a basic home or auto loan.

You can also find better options with retailers themselves. Many furniture stores, for example, offer financing plans on major purchases that don’t require payments for up to a year. This can give you a window to save money and make a cash payment in full when your first payment comes due.