In a world where cash is an afterthought and all you need is your Blackberry and Visa, sometimes we fail to think responsibly. Abusing the credit card is a direct result of convenience, there is no more counting, thinking, digging in purses or carry a big wallet, all you need to do is sign or remember 4 digits.
In a post on Yahoo Finance, Marcia Frelick, explains the 15 Times When You Shouldn’t Use Your Credit Card. From that list, I chose the top 5 that i see occur more often amongst young professionals.
1. After midnight. Paraphrasing Eric Clapton, after midnight tends to be when people let it all hang out — even financially. “After midnight is the time you get into more trouble rather than making a sound financial decision. If you’re at a club or casino, just go home,” says Michael McAuliffe, president of Family Credit Management in Chicago. Put the card away and take another look in the morning.
2. If you’re charging things that you used to pay cash for: That’s a red flag that you’re getting overextended, Virgallito says. You need to review your credit card statements and identify where the budget issues are. If you’re suddenly having more car repairs or travel expenses to visit a sick relative, you may need to create a specific savings account for those things rather than relying on credit, she says.
3. When it’s all about the rewards points: Rewards points “should be nowhere in the equation for making that decision or not making it,” says Michael McAuliffe, president of Family Credit Management in Chicago. “Base your decision on the merits of the purchase.” Otherwise, you will tend to overspend. If you want to finance a vacation, skip the coffee or dessert or find cheaper parking and put away $5 a day for a year, he says
4. If you think you’re building your credit history: David Beddoe, counselor with American Financial Solutions in Seattle, says he hears that a lot. While your credit score goes up if you pay off the purchases you make, putting items on a credit card without paying them off will have the opposite effect on your score, he says.
5. If you’re paying off one card with another, and it’s a habit: “If you’re swapping your debt every six months, that’s going to show up on your credit report,” Bowne says. If it’s a one-time thing, consider whether the offer is too good to be true. “Transfer fees have gone up at least a percent on average in the last year,” Bowne says. “We’re talking about 4 percent of your debt you’re going to pay up front just to transfer the debt.” Be clear on the rate you will pay after the promotional rate ends. It could be higher than the rate you’re trying to escape from, she warns.
The next time you think about swiping that card, ask yourself, “Is this hurting or helping me.” Credit Card abuse opens up the door for bad credit, identity theft, and debt.