Lasvegas

Gambling at a casino, getting married and buying a vacation timeshare and a new car sounds like a heck of a weekend in Las Vegas.

Those purchases are some of the dumbest uses for credit cards that we’ve come across when asking people what their worst credit card purchases are. Not all of those things were done by one person at one time, mind you, but by several people on separate occasions.

To avoid going into debt, credit cards are best used for purchases that the buyer can afford to pay for in full within a month when the credit card bill arrives. Whether it’s for lunches out every day or a recurring payment for a Netflix subscription, or even an emergency car repair, the best use of a credit card is when you don’t spend more than you can afford.

“A lot of people treat the card as an extension of their income,” says Thomas Nitzsche, a spokesman for ClearPoint Credit Counseling Solutions.

For people who can’t pay off their credit card at the end of the month, they should stop using it and develop a budget to pay the bill in full so they avoid more interest charges and fees, Nitzsche says.

“You have to have a plan to pay it off,” he says. “If you don’t you’re asking for trouble.”

If you can’t afford everyday expenses on your credit card, then a budget should help you figure out where your money is going so you can know where to cut expenses. But if you’re making extremely dumb credit card purchases, getting out of debt can be a lot more difficult.

Here are 11 of the dumbest uses of credit cards:

Wedding

A client of Norma McCarty, a ClearPoint counselor, charged her entire wedding on a credit card and then couldn’t afford the payments on the $15,000 balance.

Another ClearPoint counselor, Michael Ibanez, says he had one client who had the debt of a wedding without getting married.

“I remember one client over the last couple of months told me that she placed most of the wedding expenses on her individual credit cards and the wedding never happened as they broke up, leaving her with an excess of $25,000k in debt,” Ibanez says.

A client of Dennis Johnson charged $15,000 for a wedding and honeymoon on a credit card, and then the couple split up less than a month later.

Car

ClearPoint counselor Marla Puckett said she had a client who paid for a car for their grandchild on a credit card, and then wanted to put the credit card on a Debt Management Program, or DMP.

A DMP is a debt relief option where a counseling agency works with creditors to come up with a suitable monthly payment plan.

A client of counselor Timothy Shumer put a used car for their child on a credit card, expecting the the child to pay it off, and to hopefully pay it all back soon with a loan. The child didn’t make any payments, and the nonpayment eventually affected the parent’s credit.

A car is a depreciating asset and is one of the worst credit card purchases anyone can make, says Katie Gampietro Burke, a financial planner at Wealth by Empowerment in Jacksonville, Fla.

Burke says she had a client who used a cash advance from a credit card to put a down payment on a car they leased, only to find out they couldn’t afford the lease and the credit card payment.

Cash advances require an upfront fee of around 3 percent, along with interest charges starting on the day you get your money.

Home

Another ClearPoint client used their credit cards to build their house, Puckett says. When they tried to get a conventional mortgage to refinance their home loan, they were declined due to excessive obligations, she says.
Carrie Pink, a finance blogger in Brooklyn, N.Y., says she used a credit card to take cash advances to cover the mortgage on a home she was renting to a tenant who stopped paying rent.
It took her almost 10 months to get the tenant evicted, and Pink eventually had to file bankruptcy because of the debt she accumulated.
Gambling

Clearpoint counselor Trinette McClain says she had a client who put casino gambling expenses on a credit card.

Burke, the financial planner, says she’s seen people in Las Vegas use a cash advance on a credit card to gamble. Their thought process was “I’ll deal with it when I get home but for now I’m going to live in the moment and have fun,” she says.
The interest charged on cash advances and other purchases that aren’t paid off in full aren’t worth it, says Edgar Dworsky, founder of Consumer World.
“Any purchase you can’t afford to pay for in cash is a bad credit card purchase if you fail to pay if off in full the following month,” Dworsky says.
“Whether you pay 10%, 18%, or close to 30% in finance charges, it is hard to justify the need for something that would trigger your paying hundreds, if not thousands of dollars in interest,” he says. “Most of us earn less that 1% on our money in the bank.  Why would you want to pay 20 times that to the bank?”

Student loan

A ClearPoint client of counselor Kimberly Allen paid off an education loan with a credit card to “consolidate” their payments.

Medical expenses

ClearPoint counselor Joshua Firestone says he had a client put medical bills on credit cards. Medical bills usually have no interest rates, but credit cards do, Firestone points out.
“I remember a couple of clients telling me that they put cosmetic plastic surgeries on credit cards,” says ClearPoint counselor Missy Jefferson.
A client of counselor Norma McCarty paid for $10,000 of plastic surgery on a credit card for a girl they dated for three months.

Taxes

The IRS allows federal income taxes to be paid with a credit card, but the payment processor charges a processing fee of 1.87 percent to 2.25 percent.
“If you need the float, it might not be such a bad idea to make this charge, but if you’re paying on your credit card simply to get the miles, reconsider that this may be a very dumb purchase,” says April Masini, a New York-based relationship and etiquette expert.
Dinner date you can’t afford
“Don’t make a purchase on a credit card that’s maxed out,” Masini warns.
“Ignorance is not bliss. Know your limits and know how much purchasing ability you have before you go out on a date and negatively impress your date when the dinner bill payment is rejected. Dumb.”
Investing
A college friend of Damian Dunn, a certified financial planner at NextGen Financial Life Planning in Auburn, Ind., used the convenience checks in his credit card statement to fund his brokerage investment accounts.
“He wasn’t nearly as good at picking stocks as he thought he was and wound up losing most of his ‘investment,'” Dunn says. “Add on to that the interest and fees he was charged while repaying the loan, and things quickly went from bad to worse.”
He lost about $10,000 and it took him years to pay it off, Dunn says.
Convenience checks allow credit card users to write a check against their credit line. They’re typically used for balance transfers from another card, he says, but there usually aren’t any stipulations on who they’re written to.

Kids on a phone

A client of Eric Gabor, a financial planner at Eagle Grove Advisors in New York City, gave her young children her credit card and they linked it with an iTunes account.
“The client thought that only one charge would be authorized,” Gabor says. “However in one month, the children charged over $1,000 aggregate in small payments” such as music and games.
Gabor recommended putting a spending limit on the account via an allowance, and it worked and taught the kids a budgeting lesson, he says.
Anything you can’t pay for in full
“Every credit card purchase made that will not be paid in full by the end of the month is dumb,” says Kasey Ring, president of Upward Personal Finance in Park City, UT.
“If you don’t have the funds to pay a card off each month, you simply should not use it,” Ring says. “Of course, there will be those that argue that 0% promotional periods allow for a period of time for a free loan. True, but most of us are not disciplined enough to mark down the exact date when interest rates start back up again or set aside monthly funds to ensure it’s paid off by the end of the promotional period.”
The dumbest credit card purchases may simply come down to priorities.
“We become too much of an ‘I want it, and I want it now’ society,” Dworsky says. “Think how smart our grandparents were who used layaway plans, paying a little bit at a time for an item when they couldn’t afford it outright.
“Today too many people have it backwards. They buy it now and then worry about how to pay for it.”
Stupidity is in eye of beholder
For some people, using a credit card to pay for a wedding or an expensive dinner date isn’t dumb. If they can pay the bill off in full and avoid high interest charges, these purchases can make sense.  If you can afford it, an out-of-the-ordinary purchase can be worthwhile on a credit card, especially if you’re racking up reward points for a free plane trip.
But any credit card purchases — whether for daily living expenses or extravagant nights out on the town — are foolish if you can’t afford them and they put you into debt. Otherwise, you might as well just toss your budget away and plan on living a life in debt.

Aaron Crowe

Aaron Crowe is a freelance journalist who specializes in personal finance topics. Follow him on Twitter @AaronCrowe.

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