Published in: Credit Cards | July 9, 2019

The Worst Things to Charge on a Credit Card

What are some of the worst things you could charge on your credit card? Find out here.Man entering credit card into online shopping website.Image source: Getty Images.

Credit cards can be used to earn rewards for everyday spending. And if you pay off your bill in full by the end of the grace period after the statement comes, you won’t pay any interest on purchases. That means you can benefit from cash back, miles, or points without incurring any fees at all.

Unfortunately, if you aren’t going to pay off your card in full, you’re going to make your purchases more expensive by incurring interest. Ideally you want to avoid charging anything you can’t pay off in full -- but there are certain purchases that especially don’t make sense to charge if you aren’t going to pay off the balance at the end of the month. Here are some of those purchases.

Taxes

While it might make sense to pay for some of the items on this list with a credit card if you’re able to pay your purchases off in full, it almost never makes sense to pay your taxes on a credit card. That’s because you will be charged a processing fee to do so.

The IRS won’t accept credit card payments directly and refers you to one of three third-party payment processors if you want to pay by card. These processors all charge a fee ranging from 1.87% to 1.99%. So even if your card offers 2% cash back when you charge your taxes, at best you’ll break even. If you get less cash back than that, you’ll end up incurring an unnecessary fee that could total hundreds of dollars depending how big your tax bill is.

You should pay your taxes via check or bank transfer instead, as both options are free. If you don’t have the money to pay a tax bill that’s due, look into IRS payment plans. You may find it’s cheaper to get on a payment plan than to pay both the fee and the credit card interest you’d incur.  

College expenses

Charging college expenses is a big mistake because you may not have the cash to pay off those charges while you’re going to school. If you don’t pay on time or you max out your credit cards, you could ruin your credit before you even enter the workforce. This would make it much more difficult for you to get an apartment or buy a car after graduation. And when you go to rent your first apartment, you could find yourself in a really bad situation if no landlord wants to rent to you due to your ruined credit.

It’s also a mistake to charge college expenses you can’t pay off in full because there are other ways to get funds for school costs. Student loans -- and especially federal loans -- are typically a way better choice than using your credit cards. Student loans generally have lower interest rates than credit card debt, loans are designed to be paid off over many years so monthly payments are more affordable, and interest is tax deductible -- unlike with credit cards.

A new or used car

Buying a car with a credit card can definitely make sense to get tons of rewards points, if you can pay off the loan in full. But if you can’t repay your car’s cost and you put it on your credit card, you’re likely going to pay much more than you would have had you obtained an auto loan instead.

Auto loans generally have lower interest rates than credit cards as these loans are secured. They also have fixed monthly payments and a set payoff schedule, so there’s a limit to the amount of time you’ll be in debt. If you charge your car, you could end up paying it off for many decades if you make only minimum payments.

And the costs of the vehicle will likely eat up much of your credit limit so you’ll hurt your credit utilization ratio and likely end up with a lower credit score that makes all your borrowing more expensive.

Medical bills

Not being able to afford medical bills is frightening, but you can usually work with your care provider to find a solution. Many doctors and hospitals offer payment plans at low interest or even with no interest depending on how quickly you’re able to pay off what you owe. The costs you’d likely incur by opting for a payment plan are usually far lower than the amount of credit card interest you’d have to pay if you charge your bills.

If you find you are frequently struggling to cover care costs, you should also look into switching to a more comprehensive insurance plan during open enrollment, opening a health savings account so you can make tax-deductible contributions if you have a high deductible plan, or exploring Medicaid and other assistance programs in your area.

Unnecessary purchases

While it’s not ideal, there are times when you may need to charge essentials on a credit card even if you know you won’t pay off the bill in full at the end of the billing cycle. When you put these essential purchases on a card and incur interest charges on them, you make catching up financially harder because you’ll have to devote some of your future cash to interest charges until the debt is paid down. But if the expense is truly essential and you can’t avoid it, you may have no choice.

When it comes to any unnecessary purchases, on the other hand, those should never go on a card if you can’t pay them back before you incur interest. Non-essential purchases could include everything from vacations to wedding costs to clothing or dining out. Unless you absolutely need to charge something for your health, your safety, or to maintain employment, just don’t do it unless you know you will pay off the card when the statement comes.

Avoid charging these purchases on a credit card

By being aware of some of the worst things to charge on a credit card you can avoid incurring high credit card interest and facing serious debt trouble. Instead of breaking out your plastic to pay for any of the above items, either wait and save up cash to pay for the things you want or opt for sources of funding that make more sense for your intended purchase.

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