Many credit cards offer a slew of incentives to consumers who use them — from cash back and other rewards to zero liability in case of fraud.
But credit cards are not always your best form of payment, especially if you aren’t great with debt. In many cases, you are better off keeping the plastic tucked away.
For some readers, this advice comes too late. If you are already facing a mountain of debt, remember that it’s never too late to get help, such as through credit counseling from a reputable professional.
But regardless of whether you already have stellar credit, are in need of credit restoration, or fall somewhere in between, you will benefit from knowing when not to pay with a credit card. Following are several such purchases.
1. Medical bills
If you use a medical credit card available through your health care provider’s office to pay bills, be careful to read the fine print about your obligations, particularly those regarding how and when interest is charged.
Also consider steps you can take to reduce your health care costs. See “5 Ways Anyone Can Save on Out-of-Pocket Health Care Costs.”
2. Credit card payments
You technically can’t charge your monthly credit card payment on another credit card. But perhaps you’ve been tempted to use a cash advance from a credit card to bolster your checking account so that you can pay other bills.
You’ll generally pay a cash advance fee and likely a higher interest rate on the amount of cash advanced than you pay on credit card purchases. Also, you probably won’t get a grace period on the interest like you usually do with credit card purchases. Interest will likely begin to accumulate right away.
Your credit card is not an ATM and should not be used as one. There are real benefits, however, to transferring high-interest credit card debt to a new card with a generous 0% balance transfer offer. Just be aware of any balance transfer fees, and find out how long the 0% interest rate lasts — and pay off the balance before it ends.
3. Unsecured online purchases
When shopping online, make sure the web address starts with “https” rather than “http.” If it doesn’t, that’s your cue to take your online shopping elsewhere, as we explain in “7 Ways to Guard Your Wallet — and Identity — When Shopping Online.”
4. Student loans
If you can’t afford to pay your federal student loans, you likely have options. They may include an income-based repayment plan, deferment and possibly loan forgiveness. Take a look at “How to Get Free Help With Your Student Loans” to learn more.
Paying your student loan debt with a credit card increases the amount of interest you’re paying on the debt. Even if you have a 0% introductory credit card offer, it will expire in time.
Additionally, not all student loan servicers allow this form of payment.
5. Household bills
If you are already cutting it close for the month with your income and expenses, you may be tempted to use plastic to pay the utility, cellphone or cable bill. But if you’re not paying off your full balance each month, the interest you will be charged makes those monthly bills even more expensive.
Car dealers may not allow credit card purchases, or they may limit the amount of the purchase price you can put on your card. Like plenty of other merchants, some dealers don’t like credit card payments because they have to pay a fee to process the transaction.
If you can’t pay for the vehicle outright, go to a credit union or bank to get financing approved at a reasonable interest rate before shopping for a car.
7. Retail therapy
Think a new purchase will cheer you up? Perhaps. But remember that cash is king if you choose this mode of “therapy.” Use cash, and you won’t let your credit card balance spiral out of control — something that would not be helpful for your mood.
8. A night on the town
Handing your credit card to an unscrupulous server equipped with a skimming device isn’t your only risk.
If you’re out on the town throwing back drinks, it’s easy to run up a tab you can’t afford. So, when painting the town, it’s best to pay with cash.
9. Big-ticket items you can’t pay off immediately
Credit cards offer great purchase protections and should be used for many big-ticket purchases. But buying something on credit when you can’t afford to pay it off right away isn’t smart.
10. ‘Sale’ items
Convinced that you might miss out on savings if you don’t immediately purchase a specific item that’s on sale? That’s one of the warning signs of an impulse purchase. And you aren’t saving money by spending it on something you don’t need.
Wait a day and think about whether you really need the item. Nine times out of 10, the answer will be “no.”
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