10 Purchases You Should Never Make with a Credit Card

Credit cards can be powerful financial tools. They offer convenience, the opportunity to build credit, and can act as a loan to buy bigger ticket items. But when credit cards are not used wisely, they can cause a great deal of financial trouble. Overspending can lead to unmanageable credit card debt. To avoid out of control credit card debt, here are 10 things you should never purchase or pay for with a credit card.

1. Mortgage Payments

Most mortgage companies will not allow you to make direct payments with a credit card. If you do find a way to circumvent the rules of your mortgage servicer to make your payment with a credit card, you are asking for trouble. If you cannot pay off your credit card balance in full before your next payment is due, you will be paying for interest on a substantial balance. This added interest, on top of the interest you already pay on your mortgage, means you will end up paying much more for your mortgage payment than you should be.

2. Household Expenses

There are some arguments that favor paying for household expenses with a credit card. These arguments point out the convenience of online payments and credit card rewards. But the risk of paying your monthly home bills with a credit card is that you can easily lose track of your balance. If you go over your credit limit, you could face fees and heavy interest rates, not to mention potential late fees if your card is declined and you cannot pay your bill. Linking your online accounts to your debit card and checking account offers the same ease of payment without the added risks.

3. Medical Bills

The cost of medical care is expensive and many people struggle to pay off their medical debt. Paying for medical expenses with a credit card only makes this situation worse. If you find you cannot pay a medical bill immediately, get in touch with your medical care provider to see if they can set up a payment plan for you. Payment plans through the hospital will likely charge you much less in interest than a credit card issuer.

4. College Tuition

Most schools charge a 2-3% convenience fee for charging payments. If you cannot pay off the bill before interest accrues, you will end up paying even more. If you need help paying your tuition, the interest for student loans are often much lower than for credit cards. Talk to your financial aid department about work study opportunities, grants, scholarships, and other ways that can help you pay for college costs.

5. Wedding Expenses

Big, lavish, Pinterest-worthy weddings are all the rage right now. The average wedding costs $35,000.00. It can be tempting to start charging all your expenses to a credit card to pull off the wedding of your dreams. But unless your dreams also include crippling credit card debt, this is the worst way to budget your wedding. When you’re paying with a credit card, it can be easy to lose track of your budget and spend way more money in interest. It is better to save money ahead of time and start planning once you have enough money put away.

6. Business Startup Expenses

Paying for business expenses or startup costs with your personal credit card can be a recipe for disaster for your new business. It can take years for a business to become profitable, which means you could end up paying high interest on debt you cannot afford to pay back. Instead, opt for a small business loan which tends to have a lower interest rate. Looking for investors can also give you the cash you need up front to finance your startup.

7. Taxes

While you can pay your taxes with a credit card, you will end up paying more money which does not make good financial sense. The payment processing services that handle federal and state tax payments charge between 2-3% for using a credit card on top of a $2-$3 flat convenience fee. If you owe thousands in taxes, your processing fees can really add up!

8. Down Payments

Using a credit card to cover the down payment on your house, your car, or any other big purchase that comes with a loan is a good sign you can’t actually afford the loan. By charging the down payment, you are adding a large cost in the form of interest rates to the sales price of your item. If you find yourself scrounging around for the money for a down payment, you are better off waiting and saving.

9. Big Ticket Items You Can’t Really Afford

A good rule of thumb for credit cards is if you can’t pay it off in full by the end of the month, don’t pay for it with a credit card. This goes for cars, appliances, furniture, equipment, and any other big purchase you can’t afford outright. The interest you will accrue carrying this balance statement to statement will make these purchases more expensive in the long run. If you need to finance these kinds of purchases, look into financing options directly from the seller or loans that will allow you to include these purchases in your monthly budget.

10. Small Indulgences

These are the things you don’t really think about: your morning coffee, a sandwich for lunch, a few drinks with friends. It is convenient to just swipe your card, but without being super careful about your spending, this can lead to an out of control balance. Unless you are taking advantage of some kind of credit card rewards, it is best to pay for these items in cash. This will help you stick to a budget and spend more mindfully.

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