Sunday, April 21, 2024
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When NOT to Use a Credit Card…And a Few Surprising Times You Should

Cash has become a scarcely used currency these days. Advances in technology have all but assured us there is virtually no shop in any modern society that won’t accept credit cards as payment. Mobile readers have even allowed patrons of garage sales and swap meets to pay for their purchases with plastic!

Credit card companies even brag about their ability to be used around the globe. Remember this slogan: Visa, it’s everywhere you want to be. Or how about this one: There are some things money can’t buy. For everything else there’s MasterCard.

As it turns out you can’t use your credit card for every purchase. There are a few purchases that make even credit card companies blush and refuse to be used as payment. In these cases you really can leave home without them, contrary to what American Express wants you to think.

Naughty purchase #1: Lap Dances

Your card will get you as many drinks as you want, but it won’t get you anywhere with the ladies that work at strip clubs. If you want a lap dance or to give a girl a tip at one of these clubs you’ll have to hit up the ATM before you go. Many patrons have next day regrets about their purchases at gentlemen’s clubs leading to high charge back rates for these establishments. Because of this club owner’s and credit card companies both don’t usually allow purchases for adult services to be bought with plastic.

Naughty purchase #2: Gambling Chips

Want to try your hand at poker or roulette? Go ahead but you better have cash on hand to buy casino chips. Most states as well as credit card companies have regulations that prohibit them from exchanging pay via a credit card for gambling chips. Now, that doesn’t stop gamblers from using ATMs to get cash advances, but most people realize that they need to stop before they go that far. It’s an extremely expensive route to go if you want to gamble. Credit card companies charge interest as high as 18-25 percent on the advance as well as an ATM fee from your bank and the company that owns the credit card machine.

Naught purchase #3: Medical Marijuana

If you plan to make a purchase from a medical marijuana dispensary you might not be allowed to use your credit card to do so. Plus now that we know Big Government is recording all of our data (phone calls, internet searches, emails, bank transactions and credit card purchases) you don’t want a record of the purchase to go in your file. Federal law prohibits the use and purchase of marijuana no matter if your doctor prescribed it to you or not. American Express and Discover have forbidden card holders to use their cards for this purchase for exactly this reason. As of this week Visa and MasterCard will still allow you to use their cards to make these purchases, but they have canceled their agreements with many dispensaries so cash is usually the currency patrons have to use at these stores.

Naughty purchase #4: WikiLeaks

No matter if you view WikiLeaks as the website that published damaging, Top Secret information about the U.S. or as the whistleblower that brought offensive actions by the U.S. Government to the public, you can’t show your support for them with donations made via a credit card. Visa, MasterCard, American Express, Discover and PayPal have all banned the use of their services to give money to the site.

Naughty purchase #5: Lottery Tickets

It’s not only credit card companies that won’t let you purchase the winning ticket with a charge card, it’s also illegal in several states and banned by most retail outlets. American Express and Discover expressly prohibit the use of their cards to buy lottery tickets, as well as the residents of Connecticut, Iowa, Wisconsin and California.  If you have a Visa or a MasterCard and don’t live in one of those four states you probably still won’t be able to buy one with plastic. Many stores that sell lottery tickets won’t accept credit cards as payment for them because their sales commission is reduced by the swipe fee they have to pay the card companies.

Naughty purchase #6: Money Orders

Stores won’t let you pay with plastic for this financial tool. Mostly because you’d be borrowing money to buy cash, a highly fraudulent action. While this has cut down on the criminal activity it has not stopped the action altogether. Card holders who are allowed to purchase money orders with a charge card will incur pricey penalties from the card company. Most likely it will be processed as a cash advance, therefore charging a super high interest rate on the money and fee for the service.

Naughty purchase #7: Mortgage Payments

This one isn’t because the credit card companies won’t allow it, it’s because the lenders won’t. For starters, mortgages come with high interest rates as do credit cards. That would mean you’d be paying interest on your credit card to pay off the interest on your mortgage.  It’s also because lenders don’t want to pay credit card company merchant fees every month, it cuts into their profits.

Even if it was an allowable charge you should never charge this purchase. You’d only be robbing yourself to pay for a past purchase. The interest charges would keep incurring and you’d fall into debt very quickly.

If there are purchases that you can’t make with a credit card for one reason or another, then that begs the question of what SHOULD you buy with a credit card. Surely there are some purchases out there that give you financial benefits if paid with plastic…and indeed there are. Many credit cards offer additional perks to consumers who make specific purchases, like enhanced security and consumer protection.

Protected Purchase #1: Big Ticket Items

Expensive purchases like refrigerators, laptops, outdoor grills, televisions, and furniture should always be bought on credit, providing you can pay off the bill at the end of the month. Why? For starters most credit card companies offer additional warranties over and above the store’s original warranty. And it’s totally free. This saves you from being suckered to buying into the store’s extended warranty program which would drive up the purchase price of the item you are buying even more. In addition, you should charge major purchases like these because of the price guarantee most credit card companies offer cardholders. Most of the time if you buy a big ticket item credit card companies will refund you the difference if you see it for sale within 60 days of purchase. That price protection comes in real handy when your refrigerator suddenly stops working and you need a new one a.s.a.p. but don’t have time to price compare or wait for a sale.

Protected Purchase #2: Contractors and Handy Men

A big fear of mine is hiring service providers like landscapers or contractors to make repairs and improvements to my property. I always worry that no matter how many pictures they show me of their work, or how good a rating they receive on Angie’s List that I will get screwed over in the end.  To protect myself I always charge these purchases when I use a new service provider. This way if the bushes the landscaper put in a week ago die or the new flooring the handyman installed starts to buckle a month later I have some way of getting my money back. If I were to pay these types of service providers in cash there would be nothing I could do if something goes wrong with their work down the line. Charging these types of purchases on my credit card gives me a form of protection. If the work is unsatisfactory to me I can call my credit card company and perform a charge back to dispute the purchase.  That means I’ll get my money back and the unscrupulous service provider can’t screw me over.

Protected Purchase #3: Cellphone

Besides earning reward points for purchases made with my plastic I’m also provided with additional insurance coverage if my phone is lost, damaged or stolen; best of all this additional coverage is free of charge!  You’ll need to consistently pay your cell phone bill with your credit card to receive this financial benefit and you must be current with your provider to receive coverage. Barring those requirements you shouldn’t need to purchase insurance from your cell phone provider ever again, save yourself the cash!

Protected Purchase #4: Easily Breakable or Fragile Items

If you’re at all clumsy or have entirely too much bad luck you should buy fragile items with your charge card. Laptops, cell phones, vases, anything made of glass, or a collector’s item are all expensive and easily breakable. If you buy one and then break it you might feel like you have no financial recourse. Instead call the credit card company you used to make the purchase with and see if they can help you out. A lot of times they will reimburse you for at least a portion of the purchase. That may not make things 100 percent better, but that’s better than bearing the entire purchase price on your own.

Protected Purchase #5: Rental Car

So we’ve all learned by now not to buy the extra rental car insurance companies like Alamo, Hertz, Enterprise and Budget Rental Car try to push us into when we rent a car. If you pay for the rental with your credit card you should be covered (in most instances). Most major credit cards come with no-cost rental car collision and theft protection. If you have protection and you get into a wreck, your credit card company will theoretically pick up the tab for anything your auto insurance doesn’t cover, like your deductible, and towing charges. If you don’t have personal auto insurance, it may even reimburse you for the entire cost of the damage.  All Visa and Diners Club card holders get it automatically, while MasterCard, Discover and American Express offer it only to its elite card holders.

Protected Purchase #6: Monthly recurring charges

A lot of people have this fear of signing up for a gym membership because they are afraid the company will continue to charge them even if they cancel their membership.  Anytime you sign up for a service that needs to charge your account each and every month, you should use your credit card. Doing it this way (as opposed to having them deduct the fees directly from your checking account) offers you protection in case you ever want to cancel the services, but the company won’t stop charging you each month. If you keep getting charged but have canceled your membership you can call your credit card company to stop the recurring charges.

Protected Purchase #7: PayPal purchases

A lot of places now accept PayPal as a form of payment. It makes buying things online easier when online companies can’t accept credit cards. When you sign up for PayPal the company will ask you to link your account to your bank account. That is bad. If you ever need to dispute a charge or are a victim of fraud you’ll have a hard time getting your money back on your own. Instead link your account to a credit card. This way if you need to get your money back all you have to do is call your credit card company instead of waiting around for PayPal or the seller to do anything. You’ll have your money back a lot quicker this way.

Despite their bad reputation, credit cards can actually be great financial tools, but only if they are used correctly. It’s best to view your credit card as a convenience, not a necessity. Use them to earn rewards, cash back, consumer protection, for enhanced security and theft protection. Don’t use them to cover purchases that you couldn’t otherwise afford. Just remember that Big Brother is watching every move we make and everything we buy. If you don’t want there to be a record of a particular purchase it’s wise to make it with cash.

Keeping Money in Your Pocket,

Nancy Patterson


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