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10 Expenses To Never Put On A Credit Card
Hold up! Put the card down! Plastic fantastic, as they say, the credit card is a powerful symbol of financial freedom. Ironically, the wrong use of the credit card can lead to financial prison instead.
Credit cards are an all too easy method of paying for the things we need and want. I’m guilty to bringing out the plastic on many purchases. They are more convenient than carrying around cash. You can swipe them just about anywhere these days and to cover any expense. However, you need to be careful about how to use your cards. That is because too much spending can quickly lead to significant credit card debt.
Building credit and racking up credit card rewards can be great for your finances, but putting certain items on your card leads to big fees and higher interest rates, which cancel out any benefits.
While it’s better to pay for certain things with credit, and it’s tempting to use most purchases on that plastic, you need to use caution and think twice before you use your credit card to pay for any of the following expenses. Doing so would be much to the potential detriment of your financial situation.
- 1 Taxes
- 2 Tuition
- 3 Medical Bills
- 4 Mortgage Payments
- 5 Cash Advance
- 6 Down payments
- 7 Cars
- 8 Wedding Expenses
- 9 Vacation Expenses
- 10 Small Indulgences
- 11 Subscribe to get the free Money Master Course!
- 12 You have Successfully Subscribed!
If you get hit with a big tax bill and you don’t have the cash to pay it off in full, using a credit card to cover it may seem like a no-brainer, but when you pay your taxes with a credit card, you’ll have to cough up around 2 to 3 percent of what you owe as convenience fee to your tax service provider. Factor in the regular interest rate on your card and you could end up paying significantly more to clear your tax debt.
If you’re financially strapped, the IRS offers several different payment plan options to taxpayers and even though you’ll have to pay interest on the money, it’s usually at a much better rate than what you would get from the credit card company.
When it comes to tuition, look for other financing options than charging the card. As young adults across the country are borrowing more and more money to finance their education, they’re putting themselves at risk of their debt growing significantly.
Interest rates for credit cards are incredibly high, particularly when contrasted with those of student loans. Look for other financing options. Scholarships, grants and work-study programs are great options for covering your college expenses without racking up a ton of debt.
If you don’t have health insurance, paying for medical care out-of-pocket can be a challenge, especially if you’re being treated for a serious injury or illness. It’s tempting to pay for medical bills with a credit card, because such expenses often come at you out of the blue, when you’re not ready with a fat emergency fund.
The amount you are putting on your card to pay off those medical bills could end up costing you more than what the doctor or hospital is charging you. That is due to interest and possible late fees. It may seem like your credit card is the only option you have. There may be other alternatives. Ask the hospital about their payment plans. Chances are, their plans are a lot less daunting where interest rates are concerned. If you can, it’s also a good idea to set aside an emergency fund for unexpected expenses such as medical emergencies.
Think hard about paying for mortgages with your credit cards; you’re pretty much borrowing from one to pay another, and that’s a terrible financial plan.
Most mortgage companies won’t let you make direct payments with a credit card. Although some third-party companies will help you use your credit card to pay your mortgage, they often charge fees for this convenience. All this interest and fees soon add up and could spiral your mortgages payments out of control.
Set aside a portion of your income to pay off mortgage payments regularly instead of using a credit card and incurring heavy fees.
Credit cards companies often remind people that their cards can be used on ATMs or via cash advances at the bank. Don’t do it!
It’s best to avoid taking a credit card cash advance because the withdrawal might be subject to high fees and interest rates. Your annual percentage rate and fees will vary depending on your bank and credit card issuer, but in general, the APR on a cash advance is higher than the APR on a purchase.
Stick to emergency purchases only on the plastic and look for cash elsewhere.
If you can’t pay for a down payment upfront, you most definitely do not want to put it on a credit card with a high interest rate. It might seem like a good idea at the time, and you may think you have no other option but your credit card for paying off a down payment on a high-cost item, but in reality you may be getting into a situation that could prove problematic and costly down the line.
It’s much better to save up cash for the down payment that you are needing.
As with mortgage payments, it’s best to avoid charging car payments, or paying for a vehicle out-right with your credit card. This high-priced item could end up costing you a lot more in interest fees down the line.
Paying in cash is the better solution. You may not have the amount you need to cover the down payment or subsequent costs without resorting to your credit card. If charging the expense of a car is the only way you can see managing to buy it, you’d do well to look for a less expensive vehicle.
Don’t be tempted to charge your lavish wedding expenses on the credit card. It’s very easy to lose track of how much you’re spending if you use your credit card, and do you really want to start your wedding with a hefty amount of debt?
The better option is to save up money ahead of time. To help you could set up a savings account specifically for the wedding, and when you hit your target budget, it’s time to walk the aisle.
Just as with weddings, using your credit card to pay off vacation expenses isn’t the best idea. A vacation is supposed to be that – a vacation. I can’t imagine a vacation would be quite as relaxing if you pay interest on it for months or even years to come.
Save up for your vacations, or be a thrifty jet-setter. Wait for airline discounts, travel off-season, look for hotels giving super-cheap rooms on specials etc.
It’s convenient to whip out your credit card whenever you buy a cup of coffee or a sandwich. It feels easy as you don’t feel the expense straight away, but your credit card balance could soon grow out of control if you swipe your card for every small purchase. The higher your balance gets, the harder it will be to pay off, or even afford the minimum payment. At the end of the month, you’ll be left wondering if those cappuccinos were really worth the extra expense.
Instead of using your credit card to pay for small items consider using cash as it will help you stick to a budget.
So there you have it, don’t pull out the plastic for the above, as tempting as it is, it could end up costing you a whole lot more in the long run.
Of course, when you have shown that you can always, and we mean always, pay our credit cards ON-TIME for at least a full-year while also saving enough money for retirement, then you can put these items on your credit card for points. But first, you need to get into the proper financial habits, prove to yourself and others you can stick with the plan, and then max out on your travel points and more. Remember, there is no hurry. You can’t go to home plate without touching all the bases first.
Just keep reading our financial articles, putting words to practice (the sooner the better) and you can achieve financial independence!
What expenses do you never put on a credit card?