Almost anything can be purchased or paid for using your credit card these days. That’s because credit cards are a powerful financial tool. However, to quote Uncle Ben in Spiderman, “With great power comes great responsibility.”
As a general rule, just because you can doesn’t mean you should. Making a wrong payment could lead to serious financial difficulties and be trapped in a cycle of debt. In fact, the Federal Reserve has reported that outstanding credit card debt has hit its highest point ever in recent yes, which has surpassed $1 trillion in 2017.
Keep your finances in check and avoid putting these 6 things on your credit card according to Experian to avoid future financial trouble.
Your Taxes
If you owe taxes (of course you do, who doesn’t?), then it’s also likely that you’ve been tempted once or twice to use your Visa or MasterCard credit card to pay for your taxes. If you ever get the urge, try your best to resist it. According to Experian, you’ll end up being charged with merchant processing fees for the transaction, which could be as much as 2%. You’ll also end up paying more if you use third-party software to file your taxes.
Additionally, who would want to pay for interest on taxes owed, anyway? You should instead consider short-term personal loans or asking the IRS for a payment plan as the government usually only charges a 0.5% interest.
Your College Tuition
Paying for your college tuition using your credit card is never a good idea since you’ll only end up being charged higher rates than student loans. The larger charges will also likely increase your credit utilization, which could end up lowering your credit scores. Plus, most colleges and universities add a 2% to 3% processing fee for paying with a credit card, further increasing the amount you pay for.
Your Mortgage
Most lenders don’t allow credit card users to pay for mortgages using their credit cards. But even if they do, it’s not a good idea. There are also third-party companies that allow you to use your credit card if your lender does not, but with a hefty convenience fee. If you do end up using your credit card, you’ll only be compounding your debt with steep interest rates if you don’t pay off your balance at the end of the month. Lastly, you’ll be using up your available credit on your mortgage, which could hurt your credit score.
Purchases You Can’t Afford
It might be tempting to charge those big-ticket items (you know, that vacation to Europe or that new HD TV) to your card and then worry about payments later. Here’s a tip: if you’re having a difficult time figuring out if you can pay for the monthly payment at the end of the month, then chances are you can’t afford it, so you shouldn’t do it. You can’t pay for it, and will only use up your available credit.
Only open new accounts if you can afford to open an additional account for those 0 percent-interest purchases. However, do note that you’ll be charged steep interest rates once the introductory period ends.
Your Medical Bills
While health care costs continue to be on the rise with no signs of going down anytime soon, that shouldn’t be a reason to opt for using your credit card to pay for your medical bills because there are still other options available. Medical providers are willing to work on payment plans that offer little to no interest charged. You won’t have to use up your available credit, increase your utilization ration, lowering your credit scores. You can also work with the hospital or medical provider to negotiate lower payments on the bill so they can avoid having to write off the debt altogether.
Your Stocks and Investments
Stocks and investments are high-risk in nature. Don’t add debt to that risk as you’ll only end up with even more debt if the investment ends up failing. As Experian notes, <a href=”https://www.marketwatch.com/story/this-guy-lost-10000-trying-to-time-the-market-volatility-using-his-credit-card-2018-02-06”> one Canadian financial analyst </a> gambled $10,000 on his credit card and lost big.