Most of the time, it makes sense to pay with your credit card. You’ll earn card rewards on your purchases and as long as you pay the money back quickly, you won’t owe too much in interest.
However, there are a few purchases you should never put on your credit card.
1. College tuition
Going to college isn’t cheap. As a result, most American students can’t pay their expenses off all at once and need some other way to handle the financing.
In this situation, your credit card shouldn’t be the place to turn. Since you likely need a large amount of money, this puts a sizable amount on your card, which leads to expensive interest payments while you’re in school.
In addition, there are many better financing options available for students. You could take out a student loan or apply for a grant or scholarship. Even a simple personal loan would be a better idea than a credit card.
All these options are less expensive than using your credit card.
If you owe taxes, the IRS offers a number of payment options to make it easy for you to pay.
One option is to use your credit card through a payment processing firm. While this may seem convenient, it’s an overpriced option.
First off, you’ll need to pay an upfront fee of around two percent to use this service. After that, you’ll need to pay your card’s interest rate on your tax liability.
If you contact the IRS and tell them you can’t pay, they only charge a three percent interest rate per year on your unpaid balance. This is much less expensive than what you’d pay on your card.
“While paying by credit card is convenient,
it isn’t smart in these situations.”
3. Medical bills
Large medical bills are one more item you shouldn’t put on your credit card. Once again, this is just because you can get better financing from the medical provider.
If what you owe isn’t covered by insurance and you don’t have the money to pay off your bill, you may be able to negotiate a lower fee for your medical services.
From there, the provider would likely be willing to give you a low-interest payment plan for the bill.
4. Large, extra purchases
Large extra purchases include any fun but unnecessary items. These are things like big vacations, lavish weddings or expensive electronics. It’s not that you should never put these on your card, but it’s just a habit you should try to avoid.
If you can pay off these purchases in full, go ahead. However, be very careful about paying for these items with no set plan for paying the money back. This is a recipe for debt trouble.
While paying by credit card is convenient, it isn’t smart in these situations. Avoid making these purchases on your credit card and you’ll be in much better shape financially.
If you’d still like to use plastic, check out these credit cards for people with bad credit.
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