Good morning Dinks. Yesterday morning I was listening to the radio while I was taking my shower, this is rare for me because I actually hate listening to the radio. I prefer to listen to CDs or my iPod because I know it’s music I like and its commercial free. That’s probably an over share but anyways now you know I was in the shower.
Would you buy a car on your credit card?
I heard a commercial for a car dealership advertising a summer sale on their entire lot. The ad said to come on down and buy a new car for a really low price and they accept all major credit cards. At first I wasn’t sure if I heard it right but the second time I heard the commercial I know it was true – this car dealership accepts all major credit cards. I immediately thought to myself who would pay for a car on their credit card. There are several purchases that I would make on my credit card, but a car is not one of them.
A car is a lot of debt
There are a couple of problems that I have with paying for a brand new car with a credit card. First off, the interest rate on a credit card is extremely high. I couldn’t imagine having a $17,000 debt at 18% – been there done that. I have never paid for a car on my credit card but I have racked up several thousand of dollars in debt at a high interest rate and it’s not fun. I wouldn’t want to go down that road again.
Secondly, a lot of car dealerships offer low or 0% interest rate on financing which is a much better option than paying interest rates in the late teens or twenties. The cost of borrowing on a car should be as low as possible since it’s a depreciating asset. I am the first one to say that a car is a good purchase because it’s something we use daily and it’s convenient. But I don’t want to pay a high interest rate on the purchase.
These are three purchases that I will always make on my credit card:
Hotel room booking. As you know I love to travel. I chose a credit card that gives me travel perks such as free upgrades and access to airport lounges. My American Express Gold Card gives me extra points on travel expenses such as hotels and airplane tickets. Instead of earning 1 point for every $1 spent I earn 4 points for every $1 that I can redeem later for more travel.
My next airplane ticket. Credit cards also give extra travel insurance perks such as trip cancellation and delay or baggage insurance as well as out of country medical insurance. This can save on the costs of having to purchase additional insurance coverage when travelling abroad.
The next night out on the town. Some credit cards allow cardholders to earn extra cash back on restaurant purchases. I like using my credit card for dining out at restaurants because I earn extra rewards. It’s a small purchase that I can afford to pay off each month and it helps keep my credit score in good standing.
Photo by Flickr
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