There are certain things you should never charge on your credit card.  This is an especially key point considering Americans owed upwards of $870 billion in credit card debt alone at the end of 2018.  With that being said, credit cards can be very useful when you want to pay for everyday things like groceries, household items or for when you want to build your credit. Unfortunately, most people don’t have a strategy in place for using their credit cards.  They often spend without putting too much thought into how their balance is growing. 

Some general guidelines for responsible credit card use include: paying off the card in full at the end of the month (so watch what you spend)  and knowing the terms of your card agreement. In addition, there are some things that you should never charge on a credit card. In this article, we explain what those expenses are and why you should avoid charging them.

Here are five things you should never charge on a credit card

 

Medical Bills

 

If you’re overwhelmed by a large medical bill, you may feel tempted to pay the bill with a credit card as a quick fix. This strategy will allow you to delay the inevitable for a short amount of time. However, if you ultimately can’t afford to pay the bill once it’s due, then you’ll simply accumulate more interest. Ideally, you should try to save some money in an emergency fun  that can help you pay for large unexpected expenses. If you already have some medical debt, then you may want to consider transferring your current credit card balance to a card with a lower interest rate or zero interest rate (if you have good credit).

If your credit is not so stellar, you can always contact the billing office and see if you can work out a payment plan.  Let them know how much you can afford a month and they may accommodate you.  At the end of the day, they want to get paid so the odds are in your favor.

Taxes

While it’s true that you can pay your taxes with your credit card, you should avoid doing that as much as possible. When you pay your taxes with a bank account transfer, the payment is free. However, when you pay with a credit card, you’ll also have to pay a processing fee that is around 2 percent or more.  This can end up amounting to a large chunk of money if you have a large tax bill.

Instead, if you’re struggling to pay your taxes with your checking account, contact the IRS to see if you can work out a payment plan.  Furthermore, their interest rates hover around five percent so they are lower than what you are going to get with anything eles.   

Monthly Rent Payment

If your landlord gives you the option to pay your rent via credit card, you might think this could be a good idea.  Especially if you have a rewards card.  Just think of all those points you would be racking up!  But not so fast.  When using a credit card for a charge like this, you have to pay a processing fee like we mentioned above.  In this case, you are looking at around 2% to 3%.  The fee alone will probably wipe out any benefit you may be earning in rewards. 

However, if the card is new and you can unlock a bonus by charging your rent, this may make sense.  But only if it outweighs the fees.  In addition, this would be for one time only.

A Large Purchase

If you have a $10,000 credit card limit, it may be tempting to throw a large purchase on your card.  Or, if it’s new, charging something in order to get a sign up bonus. This should only be done if you know you can pay off the entire balance by the due date.

If you can’t pay off the balance by the due date, a large purchase sits unsettled on your credit report.  This means you will not only be paying a lot in interest, but you will do away with your credit limit.  When it comes to your credit score, your credit utilization rate accounts for 30% of your score.  The moment this percentage goes up, your credit score will take a hit.

Vacations

Yes vacations are great but if you don’t want to lead yourself down a path of debt.  If you want to take a vacation, start saving.  Every paycheck, put aside a designated dollar amount.  You will want to consult with your budget to ensure you are saving what you can.  Just think of how nice it will feel to have your vacation paid for instead of returning to a mountain of debt to stress about.

In the meantime, there are plenty of budget friendly ways to have a vacation.  Whether taking a day trip or hitting the beach, there are so many ways to enjoy life on a budget.