Being young and on your own is difficult enough. Being young with a little piece of plastic that allows you to make credit card purchases on a whim can make life a lot more difficult.
If you’re not making a lot of money early in your career, using a credit card can help make your financial life a little easier, but only if you pay the balance off in full each month. Making too many credit card purchases can push you into debt, causing you to regret buying that party dress or going out for an expensive dinner.
Impulse buys such as an expensive cup of coffee at Starbucks are bad enough to charge on a credit card, but even everyday purchases can get out of hand if you don’t think about them and consider if you can afford such credit card purchases.
While credit cards can be used wisely, everyone probably has a story of bad credit card purchases that they’ve made, and only remember it when the bill comes due. Here are some of the worst credit card purchases you can make:
Small credit card purchases that add up
From “cheap” party dresses to going out to dinner or buying rounds of drinks when your paycheck can’t afford it, Brenda Della Casa has used credit cards to make small purchases that added up to more than she thought they would when her credit card bills arrived.
She was in college when she got her first credit card, earning $10 an hour and working 20 hours a week, which turned out not be enough money to pay for the chic dinners out and rounds of drinks that her wealthier friends could afford.
“It took me four years to drive down meaningless debt accrued by things that had no lasting value,” she says. “Now, I only use my cards for bucket-list purchases and it’s one at a time. Last year it was Italy and I am close to paying that off and will then book Spain.” She estimates she pays 11% a year in credit card interest for such trips, and considers the expense worthwhile.
Foreign transaction fees
Some credit cards are getting rid of this fee, but for Jason Simms, a $30 foreign transaction fee on a hotel stay while in Greece was an expensive surprise when he got his credit card statement.
Simms found out that he could have easily upgraded to a credit card that didn’t include such fees, but because he didn’t learn that before his trip, the fee couldn’t be refunded, he was told.
Like a trip to a far-off country, a ticket to a concert or music festival may seem worth charging on a credit card as a lifetime event that’s too good to pass up. But paying interest on the charge if it isn’t paid by the first due date can make it a near-lifelong event.
Jason Bushey, who runs a personal finance website, says he bought a pair of summer musical festival tickets after his junior year of college to surprise his girlfriend, at $200 each. Bushey promised himself that he’d pay off the charge quickly, but it didn’t happen as he paid the monthly minimum most months and carried a $400 or higher balance.
He spent more than a year and a half paying off the concert tickets. The credit card balance lasted longer than his relationship with the girlfriend he was trying to impress.
Whitney Sparks, who didn’t meet her husband through an online dating service, says he used it for one date with another woman before he met Sparks. He paid $2,500 for the membership, which Sparks helped him pay off after they were married.
[pull_quote align=”left”]After a woman helped her husband pay off $2,500 for an online dating service he used once before he married her, they made another bad credit card purchase together as a couple: a ‘membership discount’ that allowed them to buy things through a magazine.[/pull_quote]One of the worst credit card purchases they made together was a “membership discount” to buy things through a magazine. They spent about $3,000 on a setting of china.
In total, they accrued $18,000 on two credit cards and bad credit card purchases, with interest rates that were always 20% or higher. They created a budget that left them $1,000 a month, and paid of the credit cards (and the bad credit card purchases) in less than five years, says Sparks, who works as a financial coach.
Some credit cards come with a 0% introductory APR during the first six months, which can turn into an interest-free loan for six months. David Bakke, who has written about credit card debt for Money Crashers, says he and a friend got a joint American Express card with such an offer, and decided to buy a $5,000 four-wheel ATV and would try to pay it off within six months.
“We had a ton of fun with it, but after a few weeks, we began to wonder whether we could afford to pay it off in six months,” Bakke says.
They couldn’t, and waited beyond the 30-day return policy to return the toy, paying off only about a quarter of the cost during the first six months. It took them another year to pay it off completely, paying more than $1,000 in interest.
But they still hadn’t learned a lesson about making bad credit card purchases, charging about $1,500 on a whim on a laptop computer, but this time without 0% APR, Bakke says. It took them about nine months to pay it off, paying more than $1,800 total for the computer.
“We didn’t try to return it — we were simply blind to how much we could actually pay for it once the credit card interest kicked in,” he says.
What are some of the worst credit card purchases you’ve made? Respond in the comments sections below.