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Here's One Purchase You Should Never Make With a Credit Card

A woman holding a shopping bag and handing her credit card to the store cashier.

Image source: Getty Images

Credit cards are a convenient way to make your everyday purchases as well as pay for occasional expenses, like medical bills. If you've ever played the lottery and dreamed about becoming a millionaire (or even a billionaire, based on the big Powerball jackpots we've seen the last few years), you might have wondered whether you could put your lotto ticket purchases on your trusty credit card. In some states (but not all of them), using a credit card to buy lottery tickets is permitted. It may ultimately be up to the discretion of the store where you're buying your tickets, though.

But should you actually buy lotto tickets with your credit card, then? No. Here's why.

Credit card interest is expensive

Credit card interest is a bear to reckon with -- as of this writing, the average APR on a credit card is 28.15%, according to Forbes. Of course, you'll only pay this (or a comparable figure) if you carry a balance forward on your credit cards month to month. Credit cards come with a grace period for purchase transactions -- this means you have time between when you buy something and when credit card interest will be charged. If you pay off your purchase before your bill's due date, you'll only pay for the amount you charged, and not pay any interest at all.

This is really the ideal way to use credit cards -- pay them off in full every month, if possible. (I'll note here that you can use a 0% APR credit card to finance a large purchase over time without incurring interest, assuming you can pay off the full amount before the 0% APR period expires -- for the best 0% APR cards, that could be as long as 21 months). The rules for interest on a lottery ticket purchase are different, however.

Lottery tickets are considered cash advances

Purchases that can easily be converted to cash (such as money orders, cryptocurrency, and lottery tickets) are considered a type of cash advance by your credit card issuer. Cash advances are best avoided, because they are expensive.

First, you'll be charged a cash advance fee (usually equal to 3% to 5% of the amount of the cash advance). And then interest will start accruing immediately -- no grace period. And some credit cards even charge a higher APR on cash advances than on regular purchases. Plus, you won't earn points, cash back, or other rewards on a cash advance. In short, you don't want to do this.

Don't go into debt to gamble

Another reason not to pay for lottery tickets with your credit card is that you're basically borrowing money to gamble. Just because you can buy a chance at a big jackpot at your corner convenience store rather than at a casino, doesn't mean it's not gambling.

Lottery tickets command a lot of money from Americans; last year, we spent a record $108 billion on them. Playing the lottery has become quite normal for a lot of people, and if you're one of them, it's far better to buy lottery tickets with cash -- and ensure you're not overspending in the process.

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