Three Things You Should Never Stick On Your Credit Card
Love them or loathe them, credit cards are an inescapable part of the modern financial landscape. Some of us are raised to avoid them, others rack up bills on their parents accounts, but most of us don’t really get much financial education about them. The reality is that credit cards aren’t good or bad – they are a tool which you can either use correctly or abuse. In certain situations, access to credit can help us to manage our personal finances sensibly. But there are also things it’s a very good idea to avoid paying for on plastic. These are the top things to avoid and why…
Your Rent Payment
If you are in a real cash crunch – as a lot of people are during the festive period – it can feel tempting to take your single biggest expense, which is usually rent or a mortgage payment- and defer it by sticking it in your card. This is a terrible idea in many ways – to use your card to pay rent, you will probably have to withdraw cash which usually has a higher rate of interest than card purchase. For mortgages, most lenders will not directly accept credit card payments, so you would be using a third-party company, who will charge a fee themselves. Also, if you aren’t able to clear the full balance the following month, which is unlikely, you will be paying two lots of interest on a mortgage – one from the mortgage company, the second on the credit card, and that kind of debt is unaffordable. You should be looking to a brighter financial future than that.
The rise of contactless payment has made it super simple to slap plastic down rather than parting with cold hard cash, and sometimes it can be tempting at the end of the month before payday to use your credit rather than a debit card to pay for little treats, such as lunch in a restaurant or a takeout coffee. It seems like such a little thing, after all. But tapping for small purchases can quickly become a habit that can leave you dealing with debt before you know it. That leads to a high balance that you can’t afford to pay off at the end of the month. Is that cappuccino really worth it now? The best idea for these kind of small purchases is to withdraw a set weekly amount for sundries in cash and stick to it. This will help you to stick to an overall budget and save you from going into debt without anything to even show for it!
Taking Out Cash
From daily amounts like paying the dog walker to unexpected expenses like car repairs and even paying bail, sometimes in life we need cash fast. But it’s far better to find alternative finances such as a bail bonds company or a garage that offers payment plans on repairs than it is to withdraw cash with your credit card. Using a cash machine is subject to much higher rates of interest and sometimes even an extra fee rate on top, which can be either a set amount or a percentage of the withdrawal amount, making it one expensive emergency. Get focused on setting up an emergency fund as soon as you can, so that if something like this was to happen, you have a little emergency cash set aside to cope.