15 Things You Should Never Pay for With a Credit Card

Credit cards can be great financial tools when in the right hands. You can use them to build your credit score and rack up rewards like airline miles or cash back on purchases. 

While it’s tempting to use your credit card for every major expense, there are some things you’re better off paying in other ways. Using your credit card for the wrong items could lead to big interest payments or other fees that make purchases more expensive than necessary. 

By learning where not to use a credit card, you can maximize your rewards, minimize or eliminate interest payments, and increase your savings. Our list of 15 things to keep off your credit card is a good place to start. 

1: Rent and Mortgage Payments

Most of the time, your mortgage company or landlord will require you to use a bank transfer or check to pay your monthly bill. However, some third-party companies allow you to use a credit card. 

Even if you’re working with one of those more lenient third parties, you should avoid using a credit card if possible. For one thing, there’s usually a service fee that could run as high as 2.99%. For another, if you’re short on cash, putting your rent or mortgage on your credit card could worsen your financial situation because of all the interest you’ll accrue in the long run if you can’t pay it off by the due date. 

2: Taxes

The IRS accepts credit card payments to cover your income tax, but you should think twice before you decide to go that route. In order to accept credit card payments, the IRS relies on third-party payment processors who charge a service fee. 

The service fee isn’t nominal, especially if your tax payment is significant. Many processors charge close to 2%, which typically outweighs any sort of air mileage points or cashback benefits you get by using your card. 

3: Medical Bills

Putting a medical bill on a credit card is risky, though admittedly, it may be unavoidable in certain circumstances. Medical bills are often high, and many people opt to use a credit card because they don’t have the available cash. However, if you do that, you’ll likely have to pay high interest rates on an already large sum, which can make your financial situation much worse. 

Instead of using a credit card, reach out to the medical provider. You may be able to negotiate a lower rate. At the very least, you should be able to arrange a payment plan that allows you to pay in installments rather than a lump sum. 

4: Utilities

Paying your monthly gas, water, or power bills with your credit card might seem convenient, but it can be costly. Utility companies typically rely on third-party payment processors, which, as you’ve likely gathered by now, charge service fees for each transaction. 

You can avoid the fees by setting up automatic payments directly from your bank account. Often, you can set this up online in a matter of minutes, making it even more convenient and ultimately less expensive than using a credit card. 

5: Peer-to-Peer Payments

Peer-to-peer payments refer to services like Cash App, Venmo, and PayPal. These payment platforms allow you to add a bank account or credit card to send money to businesses and private entities. 

In most cases, you should use your bank account when transferring money with these services. If you use a credit card, the credit card company may charge a transaction fee and treat the payment as a cash withdrawal, which means you’ll pay more money and won’t get rewards points.

6: Cash Advances

Cash advances are a perk that comes with most credit cards, but you’ll want to be careful when using them. With a cash advance, you either use your credit card to withdraw cash from an ATM or order a convenience check from a bank teller. It’s an easy process that gives you quick cash to pay bills. 

Watch out, though, because cash advances often come with extra fees. Your credit card company may also charge a higher APR, and interest often starts accruing immediately, even if your card is paid off.   

7: Online Bets

It’s not available everywhere, but many states allow you to place online sports bets or make other wagers. While doing so can be fun and sometimes profitable, you shouldn’t use your credit card to play. 

With a credit card, you’re accepting the possibility of making a high-interest payment. Many financial experts will surely agree that accepting that risk on a bet isn’t a good financial decision. 

8: Tuition

It can be tempting to use your credit card to pay your school tuition. A big payment like that could earn you a lot of reward points or air miles. However, most schools that allow credit card tuition payments also charge a service fee. 

The service fee usually outweighs any rewards or benefits you might receive. So, instead of using a credit card, opt to pay with a check or bank transfer. If you’re having trouble paying tuition, look into financial aid or scholarships. 

9: Small Splurges

A series of small impulsive purchases add up fast. Let’s say you rack up $1,400 one month (it’s easy to do if you’re online shopping and dining out). With a 19.99% APR, you’ll pay an extra $70 per month in interest alone, and it will take you over two years to pay off the debt if you’re only making minimum payments. 

You should only use your credit card when you have a plan to pay off the purchases quickly. Ideally, you should pay off your card each month before interest starts accruing. 

10: Regular Household Bills

Maybe you have a homeowners association (HOA) payment, a housekeeping service, or a lawn care company that you pay monthly. It’s tempting to pay off regular household bills with a credit card, but be careful going this route. 

Many small companies and HOAs charge credit processing fees, which make your monthly payments more expensive than necessary. If you can, pay for these services by check, cash, or bank transfer. 

11: Cars

Some people successfully purchase a car with their credit card. They might brag about the number of points they earned by doing so. But before you follow their lead, consider the following things. 

First, many car sales companies won’t allow you to use a credit card because they don’t want to absorb the processing fees. Those that will allow it may put a limit on how much of the purchase you can put on a card. 

If you’re able to put the full expense on your card, you should be able to pay it off before your monthly statement hits. Otherwise, you’ll be racking up very expensive interest on a large purchase. In many cases, you would have been better off opting for a payment plan. 

12: Down Payments

A golden rule of thumb is to avoid using a credit card to make a down payment on any purchase. Whether it’s a car, a rental house, or anything else, using your credit card when you need to put money down isn’t a good idea. 

If you need to use your credit card to make a down payment, it’s a sign that you can’t really afford the purchase. Your credit card’s interest will only make it more unaffordable. 

13: Startup Business Expenses

If you’re starting your own business, don’t put the expenses on your credit card. Businesses typically take years to be profitable, and you’ll be paying a high interest rate in the meantime. 

Instead of using a credit card, consider a small business loan. These loans usually have lower interest rates and better repayment terms. 

14: Any Purchase That’ll Max Your Credit

There are two reasons to avoid maxing out your credit with one big purchase. First, doing so could leave you paying a massive amount of interest. Second, it could ruin your credit utilization ratio. 

Credit bureaus use your credit utilization ratio to calculate your credit score. If you use all the available credit on one card, your score will dip until you pay off the card. 

15: Cryptocurrency 

Certain cryptocurrency platforms let you purchase crypto using a credit card. However, you probably don’t want to buy crypto on credit unless you have the money to pay your card off right away. 

Crypto markets are unpredictable and have dipped in value several times. If your investment loses value, you’re still responsible for paying back the credit card company with interest. 

It’s Not All Bad

While there are many items you should never put on your credit card, sometimes using your credit card makes sense. For example, if you’re buying a new appliance, you might want to use a card because many appliance purchases come with 0% interest promotions for a specified amount of time. 

Many experts also recommend using a credit card rather than a debit card for online purchases. The reason? Credit cards are less risky if the company you purchase from gets hacked. 

Many credit cards also come with car rental insurance. So, using a credit card when you rent a car can be a smart move.

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