3061: 7 Expenses To Never Put On A Credit Card by Michelle Schroeder-Gardner of Making Sense of Cents

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[00:00:30] This is Optimal Finance Daily – 7 Expenses To Never Put On A Credit Card by Michelle Schroeder-Gardner of MakingSenseofCents.com Oh, credit cards. You either love them or you hate them. For me, I love them. I love the credit card rewards that come along with responsible credit card usage. However, I know I'm not the norm. I've seen the mess that credit cards have brought upon others.

[00:01:00] So I know that not everyone feels the same way. Irresponsible credit card usage can lead to high interest charges, late fees, and a ruined credit score. It can also lead to a person spending much more money than they originally planned for. By signing up for financing or paying for a purchase with a credit card, it may make the item seem more affordable due to the fact that you aren't paying for it with money that you already have.

[00:01:27] Just because the monthly payment seems doable, it doesn't mean that it's what's best for you. Debt can lead to stress, a paycheck-to-paycheck lifestyle, delayed retirement, and more. These are all things that no one wants, especially if there are other ways around it. Side note, of course, there are always exceptions to the rule. If you know how to take advantage of certain financing offers, then you may be able to come out ahead.

[00:01:56] However, if you know that you're not good at handling credit cards and debt, then it may be best to avoid them completely and to not finance the items that I have listed in this blog post. Here are several items you should never finance or put on a credit card unless you are 100% positive that you can pay them off in full before any interest charges or fees accrue. Number one, furniture.

[00:02:24] Earlier this year, we bought a few new furniture pieces after we moved to Colorado. The salesman kept saying that we could just finance everything and then we wouldn't have to feel the pain of spending money all at once. This is a horrible idea. Furniture can be quite expensive and it can be very easy to have a large bill after leaving a furniture store.

[00:02:47] No matter how enticing those furniture financing offers may be, please remember that you will have to pay for the full cost eventually. Too many get caught up when they think about the monthly payments, but it's the full cost that's important. Number two, wedding expenses. Having a wedding can be fun, but it's not worth it to start out your life with your new spouse in debt.

[00:03:14] Wedding debt can cause arguments, stress, financial problems, and more. Weddings can be expensive or they can be affordable. A wedding can be done on any budget, no matter how low your budget may be. Remember, you can get married just for the cost of a marriage license. Number three, medical bills. Medical bills are something that no one wants to experience. However, they do happen.

[00:03:41] Before you resort to putting your medical bills on a credit card, you should contact the hospital and see if you can receive any applicable discounts for paying in cash. Then ask if you can be placed on a payment plan through the hospital. Yes, that means you will still have a monthly payment. However, your interest rate is most likely going to be much lower when paying the hospital directly rather than paying the high interest rate that your credit card charges.

[00:04:10] Number four, vacations. I bring this true story up a lot, but it's one that still shocks me every time I think about it. I know someone who uses their student loans to pay for vacations and they have even bought a few timeshares with their student loans as well. This is a horrible idea. A vacation is supposed to be that. A vacation.

[00:04:36] I couldn't imagine that a vacation would be relaxing at all if you were paying interest on it for months or years to come. There are many ways to have an affordable vacation without any debt. Number five, college costs. Recently, someone approached me and asked if they should put their college tuition on a credit card or if they should apply for student loans. The credit card had an interest rate of around 20 percent.

[00:05:03] So you can only imagine how shocked I was when the college's financial office was actually recommending this. Before you put any college expenses on a credit card, you should think about how much that large interest rate is going to impact you. Plus, your college will most likely charge you a fee for putting college costs onto a credit card as well, such as 2 or 3 percent, which can quickly add up. Number six, clothing.

[00:05:32] Numerous clothing stores now offer credit cards. They lure you in with a free item, $25 off, 5 percent off, or something else that is relatively small. If you're not good with credit cards, please ignore these offers. The small reward you may receive is not worth the trouble. Clothing never needs to be financed. If you're desperate, you could always visit a thrift store for the items you need.

[00:05:57] However, I don't know of many instances where a person would be so desperate for clothing that they would need the debt that goes along with it. And number seven, down payments. If you can't pay for a down payment up front, you most definitely do not want to put on a credit card with a high interest rate. This is due to the fact that you will have to pay for interest charges for months or years to come.

[00:06:22] It most likely will not make whatever you're paying for worth it if you are paying an extremely high interest rate. It's much better to save up cash for the down payment that you're needing. You just listened to the post titled, Seven Expenses to Never Put on a Credit Card by Michelle Schroeder Gardner of MakingSenseofSense.com. And now a word from our sponsors at Betterment.

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[00:08:46] Message and data rates may apply. You can reply STOP to opt out at any time. I wanted to make a comment here on medical debt, as Michelle mentions that you'll likely get a lower interest rate if you set up a payment plan directly with the hospital or medical provider. However, my understanding is that you shouldn't be paying any interest at all on medical debt when you set up a payment plan.

[00:09:12] I once got a bill for $1,000 because my doctor ordered a test that the insurance company wouldn't cover. I called the doctor's office and told them I was only able to pay $20 per month. And I did that for a couple of years until I got tired of calling to make my payment and so decided to just pay the rest of the bill in full. But I never paid any interest. I wholeheartedly agree, never put medical debt on a credit card.

[00:09:40] Always negotiate the bill and set up an interest-free payment plan. 93% of medical bills may contain errors and or blatant fraud. Always request an itemized bill and make sure you understand and agree to everything before you pay anything. That should do it for another edition of Optimal Finance Daily.

[00:10:05] I'll be back tomorrow as usual, so I'll see you there on the Wednesday show where your optimal life awaits.