We here at MoneySmart are big fans of using credit cards to pay for anything and everything. Using cards instead of cash means you get to rack up sweet, sweet cashback rebates, air miles and rewards points.
And while some people will tell you to freeze your credit card in a block of ice or other such nonsense, we think our readers are more intelligent than that. After all, you already know the importance of paying your bills in full and on time every month.
But there are some special situations where you should leave your credit card in your wallet or, better yet, at home, such as the following.
You are drinking
Even the most tight-fisted of people can turn to dust once a bit of alcohol is involved.
You don’t even have to be that intoxicated to fall prey to the temptation of waving your card at the bartender for just one more drink. For many people, just the warm afterglow of a well-deserved pint is enough to have them wanting more.
And given the fact that alcohol is so bloody expensive in Singapore, just getting two or three cocktails instead of just one can be enough to make you regret it the morning after. And if you get really carried away, it’s perfectly possible to blow hundreds of dollars on alcohol in a single night.
You are dining with people you’d be too embarrassed to ask to pay you back
When you eat out, it always seems like a good idea to pay for everyone present using your credit card. After all, think of all the cash back / air miles you could earn by paying for ten people at once. All you have to do is to get them to pay you back in cash. Easy!
Except that people are often assholes when it comes to paying back money, no matter how nice and friendly they seem. And often, people are going to conveniently forget to pay you back, even if you send out mass emails or WhatsApp messages gently reminding them to do so.
This doesn’t necessarily happen because they want to cheat you of your money. Rather, for many people returning that $25 they owe you just isn’t a priority, compared to all the other things competing for their attention.
So don’t offer to foot the bill for everyone UNLESS these are people you will not be to paiseh to hound for money—even if it means doing so repeatedly. If you think you won’t be able to do so, you’re better off paying your own share in cash.
You won’t have enough money in your savings account to pay for it at the end of the month
Credit cards let you pay for things with money that isn’t yours. But the catch is that, to keep your use of credit cards free, you’ll need to make sure you can pay back every single cent when the next bill arrives.
Fail to pay a bill in full, and you get slapped with very high interest on any amounts that are getting rolled over to the next month. And yes, that applies even if you’ve paid made the minimum payment. If you pay late or don’t even manage to meet the minimum payment, you’re going to get slapped with a late payment charge in addition.
The most convenient way to pay your bills is by Interbank GIRO, which frees you from the need to keep track of your bill payment deadlines. However, to do this you need to always make sure the amount of cash in your account is higher than what you’re spending on your credit card. If you have cashflow problems, you could end up incurring even more fees and charges due to an unsuccessful GIRO transaction.
So if you have any doubt at all that the amount you’re about to spend on your credit card is going to make it difficult to pay your bill in full, that is money you should not be spending unless it’s an absolute emergency.
In what situations do you prefer to pay in cash rather than by credit card? Tell us in the comments!