A few months ago, I wrote about how to stop buying on impulse. Using a decision tree like the one in that post can help you think before you spend, simply by reminding you to ask yourself important questions like “Do I already own something that does the same thing?” or “Will I have to hide this purchase from my spouse?”

For me, using decision trees has been very helpful, not just for impulse spending but for other life decisions as well. One question I’ve found myself asking a lot lately is, “Should I put this purchase on my credit card?” Rather than waste time agonizing in the checkout line (and pissing off everyone behind me), I thought I’d make a decision tree to help me make that choice as well.

Should I Use a Credit Card?

Here are the criteria I used to make my decision tree:

1. Is this a real emergency? We all say we have a credit card (or two, or ten) for emergencies, but it’s funny how anything can become an emergency if you want to buy it badly enough. So my first question is simple: Is this truly an emergency situation?

• YES: Will someone die if I don’t use the card? If a doctor says, “We need a thousand dollars or your son won’t survive,” you can bet I’ll be swiping as fast as I can. No brainer. If not, I’m moving to the next question.
• NO: Is it still very important? If not, I’m putting the card away. If so, I’m moving to the next question.

2. Will I starve or lose my home/car if I don’t use the card? Food, shelter, and transportation are basic needs. In an ideal world, no one would need to use a credit card to meet those needs. But since I’ve been there before, I’m not going to rule out the possibility that I could end up there again.

• YES: If so, I’m using the card. The end.
• NO: I’m moving to the next question.

3. Will I be able to pay off the balance when the bill comes? Let’s say something isn’t a life-or-death emergency, and it doesn’t involve meeting basic needs, but it’s still important enough that I haven’t given up yet. My next concern is whether I can pay off my balance without paying interest.

• YES: I’m moving on to the next question.
• NO: I’m putting the card away. If it’s not life or death, not a basic need, and I can’t pay it off within a month, I can’t afford it. Plain and simple.

4. Can I pay for this item with cash instead? For a long time, using a credit card was a habit for me because I didn’t keep up with my money. I would use the credit card, THEN go home and see if I had enough in the bank. That’s a backward way of thinking. Instead, I need to know the answer to that question before I buy anything.

• YES: I’m putting the card away and using my debit card or cash.
• NO: I’m moving to the next question.

5. Why not? If I can pay off the card when the bill comes, yet I’m not able to pay for the item in cash, I want to know the reason why. This is a safeguard question for me, to make sure my shopaholic brain isn’t telling me lies and helping me justify an unnecessary purchase.

• I don’t have that much money and probably won’t in the near future. Sometimes I tell myself, “Oh, I’m sure I can pay that off, as long as I sell stuff on eBay and get X amount for my birthday and Mars aligns with Saturn!” If I’m counting on money I don’t know I’m getting FOR A FACT, I know this is not a good time to use a credit card. I’m putting the card away.
• It’s between paydays, it’s an unexpected expense, etc. If I get a flat tire on Tuesday and I’m getting paid on Friday, I can justify using a credit card. (Ideally my emergency fund would cover something like that, but I’ll be honest - it’s running kind of low at the moment.) Or maybe I have money in my Paypal account but it will take 3 days to transfer to my checking account. So it’s entirely possible that I’ll have the money to pay off the credit card, but I might not have it right this second. In that case, I’d use the card.

The Decision Tree

If you’d like to use this decision tree for yourself, you can click the image below to make it bigger, or you can download a PDF to save and/or print.

One More Consideration

When it comes to credit cards, one final question I always ask myself is this:

What would I do in this situation if my credit cards were maxed out or I didn’t have a credit card?

If I would be willing to borrow money, pawn something, or sell a body part, it’s likely that the purchase really is a need. If not, it’s probably a want that’s disguising itself as a need.

For example, last summer my son became addicted to online games, and we only had one computer in the house. I decided that getting a second computer was important, mainly to keep us from strangling each other (but it wasn’t an emergency or a basic need). However, I couldn’t pay off the cost of a new computer by the following month. When I asked myself what I would do if I didn’t have access to credit, my answer was, I’d wait until I had the money saved up.

So I waited until I had enough money to buy another computer. It actually didn’t take too long, especially since I was throwing every dollar I could toward that savings goal. (It’s amazing what you’ll do when you have a whiny teenager driving you crazy!)

What About You?

How do you decide whether or not to use a credit card for purchases? Are you adding to existing credit card debt? How could a decision tree help you avoid that gross feeling of regret?