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We know from the Beatles that money can’t buy you love, but what many people don’t know is that there are lots of other attractive things you cannot buy with plastic, either. Let’s say, for example, that you apply for a new credit card because your existing card is maxed-out and you want to be able to make your next federal student loan payment. That strategy will likely backfire because the government won’t let you pay off student loans with plastic unless you have already defaulted on the loan. Ironically, if you tried to pay your loan at the last minute with a credit card and then realized too late that it was not permitted, that missed payment could push you closer to default.
The biggest reason certain items can’t be purchased with plastic is due to inconsistencies between government and state regulations. Credit card issuers don’t want to get in the middle of the two for fear of penalty. Here are a few more scenarios of when you can’t use your plastic for purchases.
Paying Debt With Debt
The scenario is not limited just to student loans, though, because almost every lender enforces policies to prevent their customers from paying off one loan with money borrowed another way through the same lender; however, they don’t object to you borrowing from Peter to pay Paul, so to speak. Try to borrow from your bank to repay your banker, on the other hand, and you’ll probably hit a serious snag.
The logic behind that policy is just common sense. Think of it this way; what if your roommate or coworker borrowed $100 from you and promised to pay you back in two weeks? How would you feel if they came to you 10 days later asking to borrow another $100? You’d want to know why, and you’d most likely laugh at them – or get really perturbed – if they explained “I need the money so I can pay you back that other $100 I borrowed.” Bankers and other lenders tend to think the same way, too.
Maybe you have a credit card with your local bank and you also used that same bank to finance the purchase of your automobile. In most cases it’s smart to stick with the same bank since auto dealerships tend to charge interest rates that are way more expensive than what banks can offer to you. If you plan to make an auto payment with the bank’s own credit card, however, chances are they will say no. This is the same concept as paying off debt with debt; just don’t do it.
Similarly, you cannot pay your monthly mortgage payment with a credit card, despite the fact that doing so would be a great way to rack up tons of points on a rewards card. Using a credit card to make a mortgage payment might be really convenient if you are traveling overseas, too, and aren’t going to return home in time to post your payment. Since you cannot do that, you need a different backup plan such as setting up a direct debit from your checking account.
Perhaps you are a risk taker who enjoys the thrill of a gamble. Or maybe you aren’t really a gambler, but you are tempted every now and then to buy a lottery ticket. After all, if you hit the right numbers you may never again have to worry about how to repay your debts. Attempting to use a credit card to purchase lottery tickets will likely be denied since only 25% of US lotteries accept credit cards, and some states still won’t accept debit cards to pay for a lottery ticket. State lotteries each have their own set of rules, but in many jurisdictions you can only pay for a lottery ticket with cash.
Everyone over the age of 18 should know by now that gambling at casinos can’t be done with a credit card, but what about online gambling. Credit card payments for online gambling looked to be taking off late last year, but were suddenly thwarted by issuers refusing to process related transactions.
Plastic and Pot
Lately the list of items you can buy in Denver, Colorado has captured news headlines and the attention of many consumers who believe that the nickname “Mile High City” is not just about Denver being at a steep elevation. States including Colorado and Washington have legalized recreational marijuana use, and that radical change has resulted in a huge economic boom as pot retailers ring up robust sales.
The shift in policy is “highly” controversial, of course, since the federal government has not yet legalized marijuana. That difference between legislation in individual states and at the federal level has prompted some major credit card companies to rethink their policies. Try to buy weed with plastic and your transactions may be declined because your card company does not want to be seen as aiding an activity the U.S. government considers illegal.