10 things you should never buy with a credit card

Building credit and racking up credit card rewards is great for your finances, but putting certain items on your card will incur large fees and high interest rates, offsetting the benefits.

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By being smart about shopping with credit, you can reduce credit card fees, save interest, make it easier to increase your savings, and eliminate debt. Here are 10 expenses you should avoid with your credit card.

1. Mortgage payment

Have you ever wondered, “Can I pay my mortgage with a credit card?” The answer is probably, but it’s not a good idea. Especially if you’re short on cash and want to pay off your mortgage with a credit card with a high limit.

Most mortgage companies do not allow direct credit card payments. Some third-party companies like Plastiq help you pay your mortgage using your credit card, but often charge a fee for this convenience. For example, Plastiq charges his 2.85% commission.

Avoiding your mortgage servicer by finding ways to pay your mortgage with a credit card is a particularly bad idea if you don’t plan to pay off your credit card balance in full each month. , paying more interest on your credit card balance is costly and avoidable.

High charges on your credit card can also reduce the amount of credit available and lower your credit score. This can also happen if you pay property taxes with a credit card.

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2. Small pleasures

It’s convenient to have your credit card ready to go every time you buy a coffee or a sandwich from the deli. You may also earn rewards such as free cash or airline miles, depending on which cashback or points credit card you use to make your purchase. But swiping your card for every small purchase can throw your credit card balance out of control, and the higher the balance, the harder it will be to pay off or even pay the minimum payment. Then you’re probably wondering if those 20 lattes are worth the extra expense.

Instead of using a credit card to pay for small arbitrary items, consider using cash. keep the budget Because if you have to put it in your wallet every time you buy something, you’re likely to be more discreet.

3. Caching

A cash advance is a withdrawal or short-term loan taken against a credit card account. Withdrawals can incur high fees and interest, so avoid cashing your credit card. Annual rates and fees vary by bank and credit card issuer, but generally his APR for cash advances is higher than his APR for purchases.

For example, let’s say you have a credit card with a purchase interest rate of 11% to 12% and a cash advance APR of 25% or higher. You can also pay transaction fees.This could be a fixed amount or a percentage of the transaction amount.

Of course, cash advances may be necessary, but these should be for emergencies only.and always look for Cash advance low interest credit card.

4. Household expenses

Can I pay my bill with a credit card? Yes. But should you?

There are some strong arguments about putting utility bills and other household expenses on credit cards. Power and water companies allow you to pay your bills online for free using your credit card, and earn rewards by linking your credit card to your account. Also, if the servicer allows bills to be paid by credit card using autopay, he has one less bill to remember to pay on time. However, the risks often outweigh the benefits.

If you pay your bills by credit card frequently, it’s easy to get into financial trouble, especially if you neglect to keep track of your balance. Overdue payments over your credit limit will result in additional interest and late fees.

Consider linking bank accounts, or Use a debit card instead of a credit card, but keep a close eye on your checking account and be aware of other bills you are paying from your checking account. Overdrawing your account can result in significant overdraft fees.

5. Medical expenses

One of the worst things you can do if you don’t have enough money to pay your medical bills is to put your medical bills on your credit card. Medical bills are expensive, and paying with a high-interest credit card just adds to the expense.

If you have large medical bills that you can’t pay right away, look for other options. For example, contact the hospital’s finance department and ask if they can come up with a payment plan or negotiate a fee. The interest you pay to the hospital may be much less than what your credit card issuer charges.

6. College Tuition Fees

College tuition is expensive. Depending on where you live, it can even exceed the cost of living. Money-losing college students often find it tempting and convenient to pay for tuition with a credit card, but resist the urge.

Unless you have a steady paycheck you can rely on, you may not be able to pay off your credit card bills before interest accrues. Additionally, many schools impose a convenient 2% to 3% fee to request payment.

In short, it’s not worth paying tuition with a credit card. If it is difficult to pay the tuition fee by the due date. Talk to your school’s financial aid officer about low-interest student loans, grants, scholarships, or vocational study programs that may be available to pay for your education.

7. YOUR TAXES

While it is possible and perfectly legal to pay taxes with a credit card, there are good reasons why you shouldn’t. Payment processors may charge a fee of around 2% for using credit cards.

The IRS lists payment processing fees that vary by payment processor. For example, paying taxes with a debit card on PAY1040.com will incur a flat fee of $2.50, while paying taxes with a credit card will increase the fee to 1.87% with a minimum fee of $2.50. increase. There is a flat fee of $2.55 for debit card tax payments through payUSAtax. Credit card usage is subject to a 1.96% fee, with a minimum fee of $2.69.

You don’t want to pay property taxes with a credit card either. The fee for paying taxes is 2% to 3% of the tax amount.

8. Automobiles

Some people claim to have used a credit card to pay for the car, but they won’t regret it because they earned a ton of points. Because you can pay online instantly and avoid hefty interest. Do not rely on this payment method unless you are sure you can do the same.

Given that your credit card balance accounts for 30% of your credit score, having too much balance compared to your credit limit can lower your score. The same applies if you were unable to pay your credit card bill because you lost control of your account balance.

Lack of cash to buy a new car suggests that it may be better to delay the purchase. At least find a used or new car that’s easier to buy.

9. Any kind of down payment

Don’t rely on your credit card for a down payment on a house, car, etc. It may be moot for homes, as credit cards cannot usually be used to pay the home down payment.

if the only reason you want to use credit card for down payment This is because you can take advantage of the higher credit limits on the card. This may indicate that you cannot afford the down payment. Adding a large expense (high credit card interest charges) to the selling price of the product makes a difficult financial situation even worse.

10. Opening expenses

Using your personal credit card to pay for your business or start-up expenses is a bad idea. It usually takes at least a few years for a business to become profitable. In the meantime, you may end up paying very high interest on debt that you cannot repay.

You may be better off with a small business loan. According to Entrepreneur, credit card interest rates are typically higher than those on traditional loans.

Even better idea: See if you can raise money through crowdfunding websites or friends and family.

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Sam Disalvo and Bali Segal Contributed the report for this article.

This article originally appeared on GOBankingRates.com: 10 Things You Should Never Buy With Your Credit Card