Credit cards can be great tools when used responsibly. However, they can quickly become financial traps if you're not careful about the purchases you make with them. As Warren Buffett once wisely said, "Only when the tide goes out do you discover who's been swimming naked."

We've all been there: swiping that credit card without thinking twice and regretting it later. That impulse buys seem harmless at the moment, but they can do some serious damage to your finances if you aren't responsible.

With over 60% of Americans carrying credit card debt month to month, it's clear that many of us struggle to use our cards responsibly. Our hope is that by highlighting these credit card faux pas, we can help you make smarter choices that will keep your finances on track.

In this article, we'll walk through the 10 worst credit card purchases that you should avoid at all costs. From cash advances to gym memberships you never use, we've got the inside scoop on the purchases that will leave you with buyer's remorse.

What Are Considered As Bad Credit Card Purchases?

As credit card holders, we've all been tempted by impulse buys and splurges that seemed like a good idea at the time. But some credit card purchases are just never smart and end up costing us way more than the item's price tag.

According to surveys, nearly half of credit card holders have made a purchase they regretted. This is true, since most of my clients have a mounting credit card debts due to bad credit card purchases. So here’s what you need to avoid:

Impulse Splurges

It's so easy to swipe now and pay later, but those little impulse buys add up fast. These are usually the things that we like, but we don’t really need. Being human as we are, there’s always this temptation of spending. A whopping 93% of impulse purchases are made with credit cards. Before you know it, you've spent a few hundred bucks on things you didn't really need and don't have the cash to pay off. 

Next time you're tempted, take a 24-hour cooling off period to decide if you really want the item. Chances are, the urge will pass.

High-Interest Debt

Another thing to consider before swiping your card is the interest of the item. Carrying a balance on a high-interest credit card is one of the worst ways to go into debt. Interest charges can quickly snowball and double or triple the amount you owe. Instead, save up to pay cash or look for lower-interest financing options whenever possible.

Large Purchases That Max Out Your Limit

Using your entire credit limit to buy something, no matter what it is, severely hurts your credit utilization ratio and scores. It signals to creditors that you're overextended and a higher risk. Try to keep charges on any card below 30% of your limit whenever possible. If you need to make a big purchase, save up first or look at other payment options.

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Your credit card can be a useful tool when used responsibly. But some purchases are just never worth the long term cost. By avoiding high-interest debt, impulse buys, and maxing out your cards, you'll keep more money in your pocket and your credit in great shape. So the next time you take off your card from your wallet, think about it carefully.

“Is the interest worth it?”, or maybe you can just pay in cash

“Do I need this now?”, Is it something you really need, or is it something you just want. 

and “Can the cost of the purchase max out my limit?”, Maybe it can wait and you can save up for the item rather than having it as another debt collection.

By being honest and answering these questions, you are becoming closer to becoming a wise spender. 

The Top 10 Worst Credit Card Purchases to Avoid

According to surveys, nearly 80% of credit card holders admit to making at least one regrettable purchase.

Below is an in-depth list of items you should never charge to your credit card. This comes along with explanations why making these purchases with credit could end up with some costly consequences.

Here are some purchases you should avoid to keep your credit cards from causing you financial stress:

1. Mortgage payments

You might be surprised with this one, but believe me. Not everyone knows it but paying your mortgage with a credit card often comes with high fees. This is typically ranging from 3% to 5% of the payment amount, which outweigh any rewards. 

For example, if your monthly mortgage payment is $1,500. Using a credit card could result in additional fees of $45 to $75, based on a 3% to 5% fee rate. These fees can quickly add up, outweighing any potential rewards or benefits offered by the credit card issuer.

Let's say your credit card offers 2% cash back on all purchases. If you pay your $1,500 mortgage with this card, you might earn $30 cash back. However, if you're charged a 3% fee ($45) for using the credit card, you'd end up with a net loss of $15. In this scenario, paying your mortgage with a credit card not only fails to earn rewards but also results in additional costs.

It's best to make mortgage payments directly from your bank account to avoid these high fees.

2. Medical bills

Same with mortgage payments, medical bills also have high interest rates. Using a credit card to pay them can quickly accumulate significant debt and interest charges.

It's better to negotiate directly with providers to reduce costs or set up an affordable payment plan directly with the medical provider.Many medical facilities offer flexible payment arrangements or financial assistance programs to help patients manage their bills without resorting to credit card debt.

Additionally, investing in insurance coverage can provide a safety net against unexpected medical expenses that could potentially harm your credit. By ensuring adequate insurance coverage, individuals can mitigate the risk of incurring significant medical bills and protect their financial well-being in the event of illness or injury.

3. College tuition 

Paying for college with a credit card often incurs high interest rates of around 10% to 20% per year and additional fees, making student loan debt even worse. 

Imagine you charge your entire semester's tuition, say $10,000, on your credit card with a 15% interest rate. That's an extra $1,500 you'd owe in just one year, just in interest!

But wait, there's more. On top of the interest, many credit cards also tack on additional fees for large purchases like tuition payments. These fees can quickly add up, making your student loan debt even worse.

So, what's the alternative? Look into lower-interest federal student loans or scholarships. Federal student loans often offer more favorable terms, like fixed interest rates and flexible repayment options. Plus, scholarships don't have to be paid back, so they're basically free money!

Now, I know what you might be thinking: "But what if I don't qualify for federal loans or scholarships?" That's a valid concern, but there are still other options worth exploring. Many colleges and universities offer payment plans that allow you to spread out your tuition payments over time without incurring interest.

4. Cars 

Buying a new car with a credit card can severely limit your financing options and often leads to high interest charges of around 20% per year or more. Imagine you charge a $25,000 car purchase on your credit card with a 20% interest rate. That's an extra $5,000 you'd owe in just one year in interest alone!

But that's not all. Cars are notorious for depreciating in value quickly. The moment you drive that shiny new car off the lot, it loses a significant chunk of its value. So, not only are you paying high interest on the purchase, but you're also financing an asset that's rapidly losing value.

It's better to get an auto loan from your bank or credit union with much lower interest rates around 3% to 7% per year.

5. Business startup expenses 

Charging business startup costs to a personal credit card mixes personal and business finances, making it difficult to separate expenses and track deductibles. It's better to get a separate business credit card or loan for your startup needs to keep finances organized and trackable for tax purposes.

Another thing to consider is uncertainty. There's no guarantee that your startup will succeed or make enough money to pay off the debt you accumulate. If your business doesn't take off as planned, you could find yourself buried in debt with no way to pay it back.

Instead of relying on credit cards to fund your startup, it's better to start small and grow your business gradually. By saving up money before you launch, you'll have a financial cushion to fall back on if things don't go as planned. Plus, starting small allows you to test your business idea and make adjustments along the way.

In the end, taking on debt for your startup isn't worth the risk. It's better to start small, save up for your startup costs, and grow your business slowly but steadily. That way, you'll be in a much stronger financial position and better prepared for whatever challenges come your way.

6. Subscriptions

So these are membership programs you won't use. Gym memberships, shopping clubs, Netflix and the like can end up costing you money with no real benefit. Check out: are gym memberships worth it.

Membership programs require you to pay a monthly or annual fee, regardless of whether you actually use the service. This means that if you don't take full advantage of the benefits offered by the membership, you're essentially throwing money away.

Additionally, even if you do use the service occasionally, the cost of the membership may outweigh any savings or benefits you receive. For example, if you only go to the gym a few times a month, you may be better off paying for individual workout sessions rather than committing to a monthly membership fee.

Have you also heard about a phenomenon known as "subscription creep."? This occurs when you sign up for multiple subscription services and forget about them over time. Since the charges are automatically deducted from your credit card each month, you may not even realize how much you're spending on these subscriptions until it's too late.

By the time you do notice, you may have already wasted a significant amount of money on services you don't use or need. This can be especially problematic if you're trying to stick to a budget or save money for other financial goals.

7. Cryptocurrency

Cryptocurrency is a highly speculative and volatile investment. Using a credit card to buy crypto can quickly accumulate high interest debt if prices fall significantly since credit card interest rates are much higher than long-term investment returns on crypto in most cases.  

Here's why using a credit card to buy crypto can be a risky move:

Highly Speculative Nature: Cryptocurrency markets are highly speculative, with prices driven by factors such as market sentiment, news events, and investor speculation rather than traditional financial metrics. This volatility means that prices can swing wildly, leading to significant gains or losses in a short time.

Credit Card Interest Rates: Credit cards typically come with high-interest rates, often exceeding 15% or more. If you use your credit card to purchase cryptocurrency and prices fall significantly, you could find yourself with a substantial amount of high-interest debt. Unlike traditional investments, where returns may be realized over the long term, crypto investments may not yield immediate returns to offset these interest charges.

Potential for Losses: While some investors have seen substantial gains from investing in cryptocurrency, others have experienced significant losses. The unpredictable nature of crypto markets means that there's no guarantee of returns, and investors could lose their entire investment.

Lack of Regulation and Oversight: Cryptocurrency markets operate with limited regulation and oversight compared to traditional financial markets. This lack of regulation can make cryptocurrency investments more susceptible to fraud, manipulation, and security breaches.

Better Alternatives: Instead of using a credit card to buy cryptocurrency, consider alternative funding methods such as using funds from your bank account or investing only what you can afford to lose. Additionally, it's essential to conduct thorough research and understand the fundamentals of cryptocurrency before investing.

Remember, the combination of high-interest debt and volatile markets makes is a big no no!

8. Timeshares

Timeshares are a bad deal. Maintenance fees increase each year, and if you can't use your week, you'll struggle to rent or sell it. According to the American Resort Development Association, owners paid over $10 billion in timeshare maintenance fees in 2019.

In simpler terms, timeshares can become a financial headache. Even though they promise a dream vacation spot, the reality is often a lot less rosy. You might find yourself stuck paying more and more each year for something you can't even use or get rid of easily. That's why it's essential to think carefully before diving into a timeshare agreement.

9. Excessive Retail Therapy

We’ve all been tempted to shop away our troubles, but retail therapy in excess is bad for your budget and credit card balance. According to a survey, nearly 60% of respondents admitted shopping to improve their mood. Remember that giant flatscreen TV or latest laptop that may seem irresistible? Guess what, their value drops by 30-50% as soon as you buy them. 

Unless you genuinely need it, avoid charging expensive tech toys to your credit card.While an occasional splurge won’t break the bank, frequent “I deserve it” trips can be hard to pay off, especially if interest charges accrue.

Common example of impulse buys:

• Clothes
• Expensive watches
• New gadgets or electronics
• Appliance upgrades

Remember, it's okay to treat yourself now and then, but keeping impulse buys in check is essential for maintaining financial stability.

10. Lavish Vacations

Maxing out your credit card limit for a vacation is a type of large purchases you can't afford. An exotic beach getaway or ski trip may sound appealing, but extravagant vacations often end up costing way more than anticipated. Travel and leisure surveys show the average American spends over $1,100 per person on summer vacations alone. Putting a dream trip on your credit card means paying for it long after you’ve returned home, as interest charges pile up. Stick to a budget, save up for big trips, and consider more affordable destinations.

Expert Tip: Instead of relying solely on credit cards to finance your dream vacation, consider leveraging rewards from your credit card. Many credit cards offer travel rewards, such as airline miles or hotel points, that can be used to offset the cost of flights, accommodations, or other travel expenses. If you're a frequent traveler, be wise in choosing your credit card to maximize rewards and benefits that align with your travel habits and preferences. By using rewards strategically, you can enjoy your dream vacation without racking up excessive debt.

In the end, the key is to only charge purchases that provide you lasting value and that fit within your monthly budget. Treat your credit cards like cash - spending only what you have - and you'll avoid many of the most costly credit card mistakes.

Tips On How To Use Credit Cards Responsibly

I know, we have all made impulse purchases on our credit cards that we later regretted. Sometimes, all we need is to be aware of our spending habits and its impact in the long run.  According to a 2019 NerdWallet study, the average household with credit card debt owes over $6,000.

As tempting as it can be to swipe now and pay later, it’s important to spend responsibly. Here are my personal recommendation to help you avoid poor credit card choices and use your cards wisely:

Avoid Cash Advances

Cash advances allow you to withdraw cash directly from your credit card, but interest charges start accruing immediately. The average APR for cash advances is over 24%, according to Credit Karma. We can easily get caught in a debt trap if we start relying on credit cards for cash.

Never Pay Only the Minimum

Paying just the minimum amount due each month is one of the worst things you can do. Interest charges continue to accumulate, and it can take years to pay off the balance. We recommend paying at least double the minimum whenever possible.

Don't Make Impulse Purchases

It's so easy to make impulse buys with a credit card, but those little swipes here and there can really add up. Give yourself a mandatory 24-hour waiting period before making any online or in-store credit card purchases over a certain dollar amount, like $50 or $100. This can help avoid regrettable impulse spending and encourage more mindful buying decisions.

Be Wary of 0% APR Offers

While 0% APR offers may seem appealing, they often only last a limited time - usually 6-18 months. Make sure you pay off the entire balance before the intro period ends, or you’ll face interest charges on the remaining amount. These types of offers frequently tempt people into spending more than they can afford to pay off quickly.

By following these responsible credit card use tips from the experts, you can avoid making poor purchasing decisions and keep your spending and debt in check. Using credit cards wisely is an important life skill that can save you thousands of dollars per year.

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Best Way To Use Your Credit Card

Earlier, we just talked about the bad purchase using a credit card. This time, let's shift our focus to a more positive note. 

Remember, in establishing credit requires using credit.  This make it essential to utilize credit cards in a smart way. Besides building credit, credit cards provide increased security for certain types of purchases. 

Here let’s talk ablout the smartest ways to utilize your credit card for everyday expenses. Many credit cards offer perks like points earned on purchases, which accumulate over time, essentially translating to "free money" for those who consistently pay off their balances, avoiding costly interest fees.

From paying bills to stocking up on groceries and more, discover how strategic credit card use can enhance your financial well-being. Let's dive into the world of best purchases using your credit card!

Bills: Using your credit card to pay bills is a convenient way to manage your monthly expenses. Many utility companies, subscription services, and other billers accept credit card payments. By setting up automatic payments, you can ensure that your bills are paid on time each month, helping you avoid late fees and maintain a good credit score.

Groceries: Groceries are a primary need, and using your credit card to pay for them can be beneficial, especially if your card offers rewards or cash back on grocery purchases. Many credit cards offer bonus rewards or higher cash back rates for grocery spending, making it a smart choice to use your card for grocery shopping.

Transportation or Gas: Whether you're commuting to work, running errands, or taking a road trip, transportation expenses can add up quickly. Using your credit card to pay for gas or public transportation can earn you rewards or cash back, depending on your card's benefits. Plus, it's a convenient way to track your transportation expenses and budget accordingly.

Insurance Premiums: Paying insurance premiums with your credit card can help you earn rewards while ensuring that your coverage remains active. Many insurance companies accept credit card payments for premiums, allowing you to earn points, miles, or cash back on these essential expenses.

Cellphone Bills: Your cellphone is a vital tool for communication and staying connected, so it's crucial to keep up with your monthly bills. By consistently paying your cellphone bills with your credit card, you may qualify for additional benefits, such as cellphone insurance coverage. However, it's essential to review the terms and conditions of any insurance coverage offered by your credit card provider, as there may be restrictions and limitations on coverage.

Using your credit card for non-discretionary expenses like bills, groceries, transportation, insurance premiums, and cell phone bills can be a smart financial move. Just be sure to use your credit card responsibly, pay your balance in full each month, and review the terms of any benefits or rewards offered by your card provider.

Frequently Asked Questions About Bad Credit Card Purchases

What is the most common problem experienced by credit card holders?

The most common problem experienced by credit card holders is overspending. It's easy to get carried away with credit cards and spend more than you can afford to pay back. This can lead to high credit card balances, interest charges, and even debt if not managed responsibly.

What are some bad reasons for using your credit card to make a purchase?

Using your credit card to make impulse purchases, buying items you don't really need, or using it as a way to fund a lifestyle beyond your means are all bad reasons for using your credit card. It's important to use credit cards responsibly and only for purchases that you can afford to pay off in full each month.

What questions do they ask for a credit card?

When applying for a credit card, you can expect to be asked about your income, employment status, and personal information such as your address and Social Security number. The credit card issuer may also inquire about your credit history and financial obligations to assess your creditworthiness.

What are some of the dangers or abuses that occur when using credit cards?

Some of the dangers or abuses that can occur when using credit cards include overspending and accumulating high-interest debt, falling victim to fraud or identity theft, and damaging your credit score through late payments or defaulting on payments. It's essential to use credit cards responsibly and be aware of the risks involved to avoid financial pitfalls.

Conclusion

So there you have it, folks - our list of the top 10 worst credit card purchases that will leave you swimming in debt.

Understanding the pitfalls of bad credit card purchases is crucial for maintaining financial health and stability. By avoiding impulse buys, high-interest debt, and excessive spending, you can keep your credit card debt in check and build a solid financial foundation for the future.

Remember, credit cards should be used as a tool to enhance your financial well-being, not as a means to fund a lifestyle beyond your means. By using credit cards responsibly and making smart purchasing decisions, you can take full advantage of the benefits they offer while avoiding the costly consequences of poor financial choices.

At ASAP Credit Repair, we understand the challenges of managing credit card debt and are here to help. Our team of experts can work with you to develop a personalized credit repair plan tailored to your unique financial situation. Whether you're struggling with credit card debt or looking to improve your credit score, we're here to provide the support and guidance you need to achieve your financial goals.

Take control of your financial future today with ASAP Credit Repair. Contact us now to learn more about our credit repair services and how we can help you achieve financial freedom.