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No Sale! 5 Things You (Usually) Can't Buy With a Credit Card

Eric Volkman, The Motley Fool

Even in this day and age, there are things plastic just can’t purchase.

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We carry and use credit cards because they are one of the most convenient financial instruments known to humankind. Whip them out and -- presto! -- instant loan for nearly anything you want to buy (within your credit limit, of course). And it’s exceedingly rare these days to find even the smallest shop that doesn’t accept them.

There are, however, numerous exceptions to this “anything you want to buy” standard. In most instances you’ll have to keep your plastic nestled in your wallet if you aim to purchase any of the following.

Stocks

It’s rare to find a brokerage that will happily accept your plastic in return for shares. Instead, most insist on a customer making cash deposits to fund their trading accounts.

The reasons for this are numerous and varied. These include but are not at all limited to:

Fees -- Merchants that sell you stuff pay modest fees that are charged as a percentage of the transaction. While 2% might not sound like a lot, if you’re buying $100,000 worth of stock, your broker’s on the hook for $2,000 or so to your card issuer for facilitating the trade.

Borrowing -- Many brokers believe, within reason, that we’re more careful with our own money rather than the dosh we borrow. So it’s unwise to allow clients to crank up their card indebtedness to buy stock. Besides, a client knocked out by credit card debt isn’t going to be a client in a position to purchase more securities from the brokerage.

Margin buying -- Brokers have had their own borrowing facility; being brokers, they have a special term for it -- margin. Letting clients borrow from their card issuer rather than the brokerage itself would cut off a good, traditional interest-earning revenue stream for them.

Casino chips

Given that nearly every aspect of a casino’s operation is geared towards getting customers to spend more money, it would be foolhardy to let them buy into games with a credit card. That’s why this is banned by law in most states.

You can, of course, indirectly fund your casino gambling with your plastic. Casinos are littered with ATM machines; you are free to use them for cash advances on your credit card(s). But this is a terrible idea, as such advances are extremely expensive in nearly every case.

Credit card debt

Wouldn’t it be nice if you could rack up points or miles on a credit card by paying off some of your other cards’ debts with it? Well keep dreaming, because with most issuers you can’t.

This stands to reason; again, fees are a consideration -- as the merchant, the issuer would have to pay fees connected with the transaction. On top of that, they don’t want to open the possibility of dispute with clients (“oh, I didn’t mean to pay off my Visa bill, I swear”). For issuers, debit instruments are a much cleaner and easier means of debt repayment.

A sort of workaround to the debt-paying-for-debt situation is to make a balance transfer from one card to another. If effected with a good balance transfer card, this can be achieved with minimal fuss and relatively modest fees.

Your mortgage

A mortgage is a form of secured debt -- the collateral for it is, of course, the house itself. So if you fall far enough behind on payments, the lender will attempt to get it back.

Most credit card debt, meanwhile, is unsecured. It’s backed only by the issuer’s belief and hope that you’ll repay it.

Swapping out what a lender considers a better form of debt for a worse one isn’t a prudent way to run a business centered on loaning money.

Also, mortgages are expensive. Paying them by credit card only adds to a debt pile, and quickly. If this pile isn’t reduced fast enough, interest accrues. So ultimately, taking on debt to pay down debt will probably only worsen a person’s financial situation, making it harder for them to pay down the mortgage in the first place.

Cars

A vehicle is another high-ticket item that can generate high credit card fees for the merchant. Some of the pricier models might even incur fees in the thousands of dollars. Is it any wonder, then, that most dealerships won’t take a Visa or Mastercard to pay for your desired ride?

Another reason such transactions are rare in the auto business is credit card limits. Most of us have limits that are well under the purchase price of a car.

All that being said, there is the occasional dealership that will accept payment with plastic, as long as the price falls within your credit limit. Some dealers also allow for the partial payment of a car with a credit card, up to a certain dollar amount. Arrangements, of course, have to be made with the dealer to pay the remainder of the price.

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