How NOT to Use a Credit Card – 10 Uses You Should Avoid at All Costs

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credit card debt womanHave you ever heard someone talk about how they use their credit card and just had to shake your head? Though the Internet is filled with good advice on how to use credit cards and rewards wisely, some people are just not getting the message.

Of course, what’s really going on is they’re getting a different message; they’re listening to what credit card companies want them to do. And because credit card companies are out to make a profit – a profit off your hard-earned money – that is generally a very bad idea.

If you want to make your credit card company happy, follow the steps below. It’s a sure way to detonate your credit score and bury yourself in debt.

How NOT to Use Credit Cards

1. Sign Up for Every Credit Card You See
Why bother to shop for the best rewards or the lowest interest rates when you can save 10% today on your purchase of socks? And why would you want a sign up bonus to travel the world for free when you can get a cheap t-shirt instead? Don’t worry about how all these credit card applications will affect your credit score either.

2. Never Pay Your Bills in Full
Figuring out how much your purchases will cost over time is very difficult and requires the use of a calculator. It is much easier not to think about complicated things like compounding interest and just make the minimum payment. Even if it means that latte will eventually cost you $50.

3. Don’t Make Your Payments on Time
Since you are not concerned with interest and what it will do to your balance, why bother with the due date? My sister missed her due date and her baby came out just fine. How bad could it be if you miss your credit card payment’s due date? They will just add some fees and raise your interest rate. Since nobody can figure out how credit card interest works anyway, why bother worrying about your APR? Who cares if your credit score suffers?

4. Always Pay Foreign Transaction Fees
Before leaving on your vacation to Mexico, don’t figure out if your credit card has a foreign transaction fee. The 3% fee you will likely be charged must certainly go to a good cause, like bank profits or something. If you happen to read about cards that don’t have this fee, like the Capital One Venture Rewards credit card, ignore it. As an extra bonus, you can make purchases from home that are processed outside the country. This allows you to pay this wonderful fee without the hassle of getting a passport and visiting a foreign land.

5. Use Your Credit Card to Withdraw Cash
Why use an ATM card when you have a credit card? With your ATM card, you can only take out as much cash as you have in your account. But with your credit card, you can withdraw against your line of credit, which is probably much more than what you have in your bank account. Definitely disregard the high cash advance APR and any fees.

credit cards cash

6. Pay Your Tuition with Your Credit Card
Pulling out your plastic is much easier than filling out student loan forms. The job market will be so good by the time you graduate that you will have no problem paying off all your credit card debt. Don’t worry about the difference in the interest rates between credit card debt and subsidized student loans. And don’t think about how the interest on student loans would have been tax-deductible, unlike your credit card interest. Rest assured that, if you find yourself in the habit of incurring debt, lifelong addictions are easy to break.

7. Help Out Your Friends By Co-Signing on Their Accounts
If you have a good friend who needs help, co-sign their credit card application. By co-signing their application, you are doing your part to help them get credit, even though you will be equally responsible for any debt they incur. Since you’re sure they won’t default, you don’t have to worry about paying their debt for them or having your credit ruined.

8. Use those Checks that Your Credit Card Company Sends You
Occasionally, you might have a rent, mortgage, or other payment that you can’t pay with your credit card. That is why you’re sent those convenience checks. Don’t shred them. Use them to pay your bills. Don’t worry about withdrawal fees or confusing terms like “cash advance APR.”

9. Always Purchase the Optional Insurance When You Rent a Car
Everyone knows that credit cards come with rental car insurance, but there are limitations on your card’s insurance policy that are downright silly. Rather than learn more about your coverage, just pay another $20 or $30 a day for the optional insurance offered by the rental car company. The guy behind the counter recommends it and besides, what are the chances he’s biased and gets a commission?

10. Sign Up for Your Bank’s Payment Protection Plan
By paying a fee each month equal to a few percent of your balance, your bank will help you when you are in financial trouble. If you lose your job or are injured, they will graciously allow you to accrue compounding interest on your balance without having to make your minimum payment. That is really nice of them. They must be some kind of charity as I am sure there isn’t much profit in this kind of service. What’s a few percent each month anyway?

Final Word

Follow these steps to ensure financial insolvency while helping your bank in these difficult times.

Seriously, it’s easy to be fooled by advertising schemes that want you to do exactly what’s outlined in the steps above. As with any financial decision, know what you’re doing, why you’re doing it, and if you have any alternatives. Now that you know what not to do, look at how to outsmart your credit card company, instead of the other way around.

Have you made any of the credit card mistakes listed above?

  • HenryTalksMoney

    I wouldn’t mind getting a store card to get an additional discount on a big purchase. If I’m planning to use my own credit card and pay it off anyway, why not get that discount? I wouldn’t waste it on a small purchase though, but a 10% discount on a $1,500 item may be worth my while. Credit cards are all about discipline. The more disciplined you are, the better they are for you.

    • Sally Aquire

      Thanks for commenting, HenryTalksMoney!

      I think store cards are fine if you’re going to be paying off the balance as the big interest doesn’t affect you but it could be a complete disaster for people who just keep rolling the balance over. You sound disciplined though so it would probably work well for you.

      • HenryTalksMoney

        Thanks, Sally! I try to be.

    • Dan

      Interesting thing though about store credit cards. You can always seem to sign up for them, but if you’ve got a lot of them, and you apply for a mortgage, you will either be denied or have a really high interest rate. So make sure you really want that new store credit card on your credit score the next seven years before decided to purchase that $1500 item or it might end up costing your more than you save on something like a mortgage. (of course, that’s assuming you’re going to get a mortgage, but I just thought I’d throw that out there.)

      • Sally Aquire

        Good point, Dan! Thanks for adding your thoughts!

  • MikeyrInFL

    I have often used a credit card outside the country without problem. I agree it is important to know the policies and practices of each credit card before you leave home. Of my two otherwise perfectly good cards, one has acceptable charges for international transactions including cash advance and currency exchange, the other card does not. As is always the case, it’s all about being informed ahead of time.

    • Sally Aquire

      Thanks for commenting, MikeyrInFL!

      That’s a really good point actually. I have friends who blindly assume that because one of their cards didn’t land them with extortionate amounts while they were abroad, none of the others will either. They’ve found out the hard way that it pays to check it out before you go!

  • Hana

    i disagree with the advice about travelers’ checks. In much of Europe, they are practically useless. When my now son-in-law went to visit my daughter when she was studying in Belgium,he brought travelers’ checks. They were practically useless- it was very hard to find places to cash them, and very few merchants accepted them. Withdrawing from an ATM was the more sensible option.

  • jay

    I agree with not using your credit card for getting money out of atm’s.
    I don’t see the problem with applying for a card if you’re getting a discount through the card, so long you pay the entire balance by the due date.
    I don’t particularly like traveler’s check, but I see why so many people like them: you don’t loose your money, especially when in a foreign country. That’s the last thing you’ll wanna a deal with.

  • Kollin

    Use credit cards only when you can pay off the entire balance by the end of the month! If you cannot do that, you do not need what you are buying that badly! Using credit cards to buy what you cannot afford is a great way to find yourself in a financial disaster! If you cannot buy with cash, you really do not need what you are buying…do you? There is a big difference between “need” and “want”. Only trouble that you have when paying off your credit card every month is that it ruins, yes I said ruins, your credit. Credit card companies negatively report you because you aren’t showing that you are a good credit risk. The best advice is to pay it off over six months. That way if you want to make a major purchase in the future your credit is built up and you show that you are responsible.

  • Bob

    You forgot one. ALL credit card transactions are now reported to the IRS. So, Big Brother now knows what you bought, where you bought it and how much you paid. Nothing could be wrong with that!

    • Jay Gee

      Also, it bugs me to see people at a convenience store that use their credit card to buy a coffee for $1.79

  • Nanalajane

    Good article, thanks Jason.

  • Pete

    Also, don’t use a credit card unless it gives points or cash back. Even 1% cash back or one point per dollar ads up at the end of the year. If you pay in full each month and have a card without a monthly fee, any extras you earn are free.

  • JC

    Make sure to pay the balance from one card with another card.