10 Purchases to Avoid Charging to Your Credit Card
Building credit and earning credit card rewards can be beneficial for your finances, but using your card for certain purchases can lead to high fees and interest rates, negating any advantages.
If you use your credit card wisely, you can minimize fees, save on interest, build savings, and reduce debt. Here are ten expenses you should avoid charging to your credit card:
1. **Mortgage Payments**
While it might be possible to pay your mortgage with a credit card through third-party services like Plastiq, which charges a 2.90% fee, it’s generally not a good idea. Most mortgage companies don’t accept direct credit card payments, and using a credit card can lead to additional interest charges if you don’t pay off the balance in full each month. This can also reduce your available credit and potentially lower your credit score.
2. **Small Indulgences**
Using your credit card for small purchases like coffee or snacks can quickly add up. Although you might earn rewards, the growing balance can make it difficult to pay off your card, leading to higher interest payments. Using cash for these small items can help you stick to a budget and avoid unnecessary debt.
3. **Cash Advances**
Cash advances from your credit card come with high fees and interest rates, often higher than those for regular purchases. For example, while your card might have an 11%-12% interest rate for purchases, cash advances could have rates of 25% or more, plus transaction fees. Reserve cash advances for emergencies only and look for cards with lower cash advance rates if necessary.
4. **Household Bills**
While you can pay household bills like utilities with a credit card, it might not be the best choice. Some service providers allow credit card payments without fees, which can be tempting for earning rewards. However, the risks, such as accumulating debt and paying high interest rates, often outweigh the benefits.