I often cringe whenever I hear someone downplay their credit card debt and continually use credit to buy stuff they can’t afford. I respect everyone’s right to make their own choices. But if appropriate, I’ll also drop little nuggets of truth warning about the potential dangers of credit card debt—without being too intrusive or pushy.
After paying off my maxed out credit cards 15 years ago, I vowed never to repeat the cycle. Cash is my preferred method of payment, but I will use a credit card on occasion. Rather than carry the balance from month-to-month, I pay it off within a month.
Credit is convenient, especially when booking an airline ticket, hotel reservation or car rental. But if not used responsibly, there’s the risk of debt, a damaged credit score and creditor headaches. So I encourage everyone to put down the plastic and pull out the green. But, of course, no situation is ever black or white. There are gray areas, so here are seven times when you shouldn’t feel guilty about using credit cards.
Your Medical Debt Is About to Go to Collections
If you have medical debt, it’s cheaper to set up a payment plan with a medical facility. A payment plan is often interest-free, and the debt won’t appear on your credit report unless you default.
I’ve set up payment plans with medical facilities in the past, and from personal experience, some facilities don’t allow payment plans longer than six months or 12 months. So if you have to settle a rather large bill, you could end up with a monthly payment you can’t afford. And if you can’t afford the payment, the hospital or doctor’s office may send the debt to collections.
Since a collection account can lower your credit score and stay on your credit report for up to seven years, it might be advantageous to pay off a medical debt with a credit card, and then slowly pay off the card. The minimum payment on your credit card might be lower than the monthly payment under a payment plan through your doctor’s office.
If you use a credit card for medical debt, use a card with a low interest rate or one that offers a 0% introductory rate, if possible.
The Opportunity for a Once-In-a-Lifetime Experience
Sometimes we’re offered opportunities of a lifetime, and the one thing standing between us and these experiences is money. While I don’t recommend getting into debt under the notion that we only live once, the occasional splurge won’t kill you. But rather than use a credit card to splurge on clothes or material possessions—which eventually get old and lose its appeal—use the credit card to build new memories and broaden your horizon.
Although you shouldn’t feel guilty about using a credit card during these times, you have to be realistic about your situation. Debt shouldn’t interfere with paying bills or putting food on the table. Make sure you have a plan for paying off the debt in a reasonable timeframe, or else you could end up paying interest for years.
You Don’t Want to Carry Cash or a Debit Card
As much as I prefer using a debit card and paying for things with cash, I realize this isn’t everyone’s cup of tea. I’ve spoken to at least two people who don’t carry cash because of the risk of losing money, and they don’t trust debit cards because these cards are tied to their bank account. I understand their concerns, and I know firsthand the headache and inconvenience of someone swiping your debit card number and using funds in your bank account for a spending spree. A few years ago someone used my debit card number and spent $600 from my account. The bank reimbursed every cent, but it took a week to get my money.
It also takes between seven and 10 days for a credit card company to credit funds back to your account if you’re a victim of identity theft. The difference between credit card fraud and debit card fraud is that credit card fraud doesn’t affect your cashflow.
If you don’t trust or feel comfortable using cash or a debit card, a credit card is the way to go—but only if you’re committed to paying off charges.
You Have a Real Emergency
In the event of a real emergency and you don’t have access to cash, a credit card is the next best thing. Life is unpredictable, and unexpected costs will happen when you’re cash strapped and can’t wait until payday.
Even if you don’t like using credit cards, you shouldn’t feel guilty about using your card when there’s a legitimate need. That’s the point of a credit card—it provides cash when you need it most.
You Need to Build Credit
Applying for a credit card is one way to build credit. But if you want to strengthen your credit score, it isn’t enough to have a credit card, you need to use it.
The good news is that you don’t have to acquire massive debt to build or improve your credit. It doesn’t matter how little you put on the card, if you keep the account active, your credit card company will report positive information to the credit bureaus. Use your credit card every couple of months for small purchases and then pay off the balance.
I frequently read articles about credit cards and debt, and I often see writers advise readers to avoid credit cards altogether. But while there’s temptation to spend with credit cards in your wallet or purse, credit cards aren’t evil when used responsibly. If you have willpower and can commit to spending in moderation and within budget, there’s no reason to feel guilty about using credit.
What are your thoughts on using credit cards?