Credit card debt has hit a record high of $1.17 trillion. Yet, everyone you talk to claims they pay their credit cards off every month. If that’s true, how is the balance rising? Somebody is lying! The average interest rate on credit cards is 22.80 percent, while department store cards can soar as high as 30.45 percent. Companies earn more on credit cards than they do in the stock market.
Financial advisers may disagree on many things, but one thing we all agree on is that credit cards are bad debt! Credit cards are one of the most misused financial tools out there. Swipe now, worry later—that’s the mentality. But that “later” comes with high interest, stress, and a financial mess. If you’re serious about building wealth, you need to stop using credit cards for these expenses. Let’s break it down.
Furniture— The Trap of Low Monthly Payments
That “no interest for 12 months” deal sounds great—until you realize that if you don’t pay it off in full, they hit you with retroactive interest on the full amount. Suddenly, your $1,500 couch costs you $2,300. And let’s be real—most people don’t pay it off in time. Furniture is a want, not a need. Save up and buy it outright!
Weddings — Love Doesn’t Need Debt
Nothing says “Happily NEVER After” like starting your marriage in financial stress! That dream wedding can quickly turn into a nightmare when you’re still paying for it years later. If you can’t afford the big wedding, scale it down. Focus on the marriage, not the party.
Medical Bills — Negotiate First
Hospitals and doctors WANT their money—but they’re also willing to work with you. Instead of slapping that hospital bill on a 25 percent interest credit card, negotiate a payment plan with the hospital. Many offer zero-interest options or discounts for upfront payments. Your health matters, but so does your financial future!
Vacations— Pay for Fun, Not Regret
That trip to the Bahamas was amazing… until you’re still paying it off years later. There’s nothing relaxing about coming home to a mountain of debt. If you can’t afford the trip, don’t take it. Save up and go debt-free. Future you will thank you.
College Costs — The Most Expensive Swipe of Your Life
College tuition is already expensive. But paying 20 percent-plus interest on top of it? That’s financial insanity. Student loans may not be perfect, but they at least come with lower interest rates and flexible repayment options. Putting tuition on a credit card is a one-way ticket to financial disaster.
Clothing — If You Can’t Afford It, Wait
Don’t charge your clothes on a credit card! Don’t go BROKE trying to look rich! If you don’t have the cash, you don’t need the outfit. Trends change, but debt sticks around. Instead of financing your wardrobe, build a budget-friendly style that keeps you out of debt and looking good.
Down Payments—No Cash? No House.
A down payment on a home is a commitment—and if you have to swipe a credit card to cover it, you ain’t ready. Get your financial house in order first, then seek homeownership! If you can’t save the down payment, how will you afford property taxes, maintenance, and unexpected expenses? The same goes for cars. No cash for a down payment? You can’t afford it. Period.
Taxes—The IRS Doesn’t Forget
Paying your taxes with a credit card might seem convenient, but the processing fees and high-interest rates can make this a costly choice. The IRS offers installment plans with much lower interest rates. Don’t let tax season push you deeper into debt.
Gambling — The House Always Wins
Using credit cards for gambling is a slippery slope. Not only can you lose the money you gambled, but you’re also piling up debt with high interest. Some credit card companies even treat gambling transactions as cash advances, which come with higher fees and interest rates.
Cash Advances —The Silent Killer
Speaking of cash advances, avoid them like the plague. They come with immediate interest, higher rates, and no grace period. It’s like borrowing money from a loan shark. If you’re that desperate for cash, it’s time to reassess your financial habits.
Utilities and Groceries — The Budget Busters
If you’re putting everyday expenses like utilities and groceries on a credit card because you can’t afford them otherwise, you’re living beyond your means. This is a red flag that it’s time to reassess your budget and cut unnecessary expenses, and Get A GRIP on your Money!
REAL TALK: Credit Cards Are NOT Free Money
Credit should not be used as a supplement to your income. Rates on credit cards are extremely high plus you tend to spend more when using credit cards compared to spending cash. When you use credit cards and carry a balance, you’re essentially paying high prices for your vices!
Here’s what to do instead:
Build an Emergency Fund—Many people swipe credit cards because they have no cash reserves. Start with $1,000 and work toward 3-6 months of expenses.
Budget for Big Purchases—Need furniture? A new wardrobe? A vacation? Save for it instead of swiping. If you can’t afford it now, you can’t afford the debt either.
Negotiate Bills—From medical expenses to utilities, you’d be surprised how much you can lower costs just by asking.
Credit Card Guardrail—Never carry more than 2 credit cards with a $2,000 credit limit each. Never allow the credit card balance to be more than 30 percent of the limit. Therefore, you’ll never have a balance higher than $600 on either card at any given time.
As my mother always says, “Don’t play with plastic. Plastic can smother you.” Credit cards are nicknamed “plastic” for a reason. I’m reminded of a time a journalist called me, asking what concepts and principles we should teach young children about credit cards. I told them, “Parents should put a Mr. Yuk sticker on them.”
When I was younger, my mother used to put Mr. Yuk stickers on household products like bleach, ammonia, and Pine-Sol. The reason why? These products are hazardous to our health. Mr. Yuk stickers will remind children that credit cards are hazardous to their wealth.
Stop making lenders rich and start making smarter financial decisions.
(Damon Carr, Money Coach and Tax Pro can be reached at 412-216-1013 or visit his website at www.damonmoneycoach.com)
About Post Author
