10 Things You Should Never Use Your Credit Card for

1. Monthly Household Expenses:

Since many online grocery stores offer co-branded credit cards that can earn you reward points, many individuals prefer doing their day-to-day shopping with credit cards. Even if you do not have a co-branded credit card, many cardholders believe that a regular credit card can help them achieve a minimum purchase limit which can waive off their annual charges or earn them better rewards. However, paying for your monthly expenses like groceries, house rent, etc. can make you spend more than your budget. It also builds a habit of using a credit card for all the expenses, which can create a huge debt in the long run that becomes challenging to repay. Therefore, it is not advisable to use your credit card left, right, and centre for all your household expenses.

2. EMIs:

While paying your monthly loan repayments with a credit card is not common in India, many Fintech companies, app-based loan providers, instant loan providers, etc. have started offering loan repayments through credit cards. If you are in a cash crunch, you might feel it is convenient to pay your EMIs with the help of a credit card. However, if you are unable to repay your credit card bill on or before the due date, the loan can become very costly to you. Since it is a loan, you are already paying interest on it. Not being able to repay your credit card dues will add high interest on it and the loan becomes exorbitant to you.

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3. Big Purchases:

Most cardholders think that credit cards are meant to be used to make big purchases which would otherwise be unaffordable to you. In fact, making big purchases that you might not be able to repay within a stipulated time can put you in a debt trap. It is crucial to use your credit cards wisely and only when you are sure of making the repayments on time. Some cardholders buy expensive products and services even if they cannot afford to repay them and then opt for a credit card EMI facility, which charges a very high-interest rate. This not only makes the purchase costly but can also make your finances unmanageable.

4. Small Indulgences:

Today's fast-paced lifestyle makes us all stressed out, which in turn makes many of us indulge in affordable luxuries to seek ways to reward ourselves. If you find yourself frequently taking 'retail therapy', make sure you set aside a small monthly budget for such small indulgences. Frequently using your credit card for small indulgences can create a huge credit card bill at the end of the month that becomes difficult to repay on time. We all deserve to reward ourselves but there should be a limit on how much you should spend on retail therapy every month and it should be done from the money you have in your bank account and not by borrowing and slowly creating a debt.

5. Business Capital:

You might have heard success stories of how some successful business persons had started their business with the help of a credit card. Well, the startups require you to take risks but it should be a calculated risk. The rate of failure of startups is very high in India. In fact, most startups rarely get off the ground in the first five years. This makes using a credit card, which usually comes with a high-interest rate and late payment fee, a highly risky option. If you are looking for a business loan for your startup, click here to to know top 9 business loans for startups by the Government of India.

6. Cash Advance:

A cash advance is a way to get money instantly by means of making a cash withdrawal through your credit card. Many credit cardholders believe that a credit card cash advance is similar to swiping a card that does not attract any interest if the repayment is done on time. However, the credit card provider charges interest for a cash advance from day one. Apart from the interest, you will also get charged with a high cash advance fee. It does not make sense to take credit card cash advance as by using this facility you end up paying much more than what you have borrowed. If you need money for some emergency, instead of using the cash advance facility, it is better to check with the banks and NBFCs for personal loans that can be availed immediately and charge comparatively lower interest rate.

7. International Travel:

A credit card is considered a safer mode of payment for international transactions. However, you should know that whenever you swipe your credit card out of India, your credit card provider charges you with a foreign transaction fee, which could be fixed or a percentage of the transaction amount. These charges can make your international purchases expensive. Hence, to avoid foreign transaction fees and make your transactions even safer, it is advisable to use forex cards. These pre-loaded cards are cost-effective and even if the card is lost or stolen, only the amount loaded on the card is at risk.

8. Medical Bills:

A medical emergency can come at any time. If you do not have a health insurance policy, managing medical bills can be challenging. But using your credit card to pay your medical bills is not a good option. Since medical treatments are expensive, you might not be able to clear your dues in full in the next billing cycle. The high due balance on the credit card and high-interest rate add to the cost. Therefore, it is best to cover yourself with the right health insurance policy. However, if you do not have the insurance cover and need the money urgently, consider opting for a personal loan as personal loans generally have lower interest rates compared to credit cards.

9. School/College Fees:

College or school fees can cost you a pretty penny, depending upon your location and educational institution. But paying such huge fees through credit cards can increase the chances of not being able to repay the dues in full before the due date. Hence, it does not make sense to pay your or your child's school or college fees with a credit card. Instead, you can apply for an education loan that comes with a lower rate of interest and offers sufficient time to repay the dues.

10. Down Payment:

Sometimes the down payments can be unaffordable, especially for big loans like home loans and car loans. If the borrower is in a cash crunch and cannot afford the down payment, they consider opting for a personal loan or credit card cash advance. However, making a down payment of any kind of loan through a credit card or any kind of borrowed money is not advisable. Not being able to afford a down payment is a sign that you are in a challenging financial situation. Paying the down payment with high-interest borrowed money will make it even more difficult.

To Conclude:

If you are not sure when you should use your credit card and when you should not, the best way is to treat it like cash. Swipe your credit card only if you are confident that you will be able to repay it in full before the due date. Furthermore, it is not advisable to pay with your credit card for small indulgences and day-to-day expenses as it can destroy your monthly budget and create a slow debt. If you have already created a credit card debt, here are 7 simple ways to get out of a credit card debt faster.

Warm Regards,
Ketki Jadhav
Content Writer