Credit cards can be a convenient financial tool, but they can also lead to significant debt if not used wisely.
While it might be tempting to charge various expenses to your credit card, certain items should be avoided to prevent throwing money away.
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Taxes
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Using a credit card to pay your taxes can seem like a quick solution, but it usually comes with high processing fees. These fees can range from 1.87% to 3.93% of your payment amount, which can add up quickly, especially if you owe a large sum.
Plus, if you can’t crush your credit card balance immediately, you’ll accrue interest, making your tax bill even more expensive.
Medical bills
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When faced with medical bills, it might seem easier to charge them to your credit card. However, this can be a costly mistake. Medical providers often offer payment plans with little to no interest, which are far more manageable than high-interest credit card debt.
Negotiating your medical bills directly with the provider can also lead to significant reductions in what you owe.
Cash withdrawals
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Taking out cash advances on your credit card is one of the most expensive ways to access money. Cash advances typically come with higher interest rates than regular purchases and often include an additional cash advance fee.
Interest on cash advances starts accruing immediately, without the usual grace period, making this an expensive option.
Resolve $10,000 or more of your debt
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Any large purchase that will max out your credit limit
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Maxing out your credit limit can negatively impact your credit score. High credit utilization ratios can signal to lenders that you’re overextended and may have difficulty repaying your debts.
It’s better to save for large purchases or explore other financing options that won’t harm your credit score.
Your monthly mortgage or rent payment
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Using a credit card to pay your mortgage or rent can quickly lead to unmanageable debt.
These payments are usually your largest monthly expenses, and carrying a balance from month to month can result in substantial interest charges, not to mention typical transaction fees ranging from 2% to 3%.
Look for other ways to manage these payments, such as direct transfers or electronic checks.
Utilities
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Paying utility bills with a credit card can lead to a cycle of debt if you can’t pay off the balance each month. Utilities are recurring expenses, and carrying a balance can quickly accumulate interest, increasing your financial burden.
Some utility providers also charge processing fees if you pay your bill using a credit card. Setting up automatic payments directly from your bank account can help you avoid these financial pitfalls.
Online betting
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Gambling with credit cards can lead to severe financial problems. Gambling transactions can result in significant debt if not managed responsibly. The addictive nature of gambling combined with easy access to credit can create a dangerous financial situation.
Tuition
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While you might consider using a credit card to pay for tuition, especially if you would earn rewards points, the high interest rates and added payment processing fees can quickly outweigh the benefits.
Student loans usually offer lower interest rates and more flexible repayment options, making them a better choice for financing education.
Peer-to-peer (P2P) payments
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Using credit cards for peer-to-peer payments through services like Zelle, Venmo, or Cash App can incur transaction fees of around 3%.
These fees can add up, especially for large or frequent transfers. It’s more cost-effective to use bank transfers or debit cards for P2P payments to avoid these extra charges.
Earn cash back on everyday purchases with this rare account
Want to earn cash back on your everyday purchases without using a credit card? With the Discover®️ Cashback Debit Checking account (member FDIC), you can earn 1% cash back on up to $3,000 in debit card purchases each month!2
With no credit check to apply and no monthly fees to worry about, you can earn nearly passive income on purchases you’re making anyway — up to an extra $360 a year!
This rare checking account has other great perks too, like access to your paycheck up to 2 days early with Early Pay, no minimum deposit or monthly balance requirements, over 60K fee-free ATMs, and the ability to add cash to your account at Walmart stores nationwide.
Don’t leave money on the table — it only takes minutes to apply and it won’t impact your credit score.
Impulse expenses
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Charging impulsive purchases on your credit card, even if they’re small, can lead to unnecessary debt.
Items bought on impulse are often non-essential and can quickly accumulate, leading to a larger balance that might be difficult to pay off. Smart shoppers budget for these expenses or use a debit card to keep spending in check.
Bottom line
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Before charging any expense to your best credit cards, consider the long-term implications and explore alternative payment methods that can help you stay financially healthy.
Reflect on your current credit habits: Are there expenses you should start handling differently to avoid falling into a debt trap?
Lucrative, Flat-Rate Cash Rewards
FinanceBuzz writers and editors score cards based on a number of objective features as well as our expert editorial assessment. Our partners do not influence how we rate products.
Wells Fargo Active Cash® Card
Current Offer
$200 cash rewards bonus after spending $500 in purchases in the first 3 months
Annual Fee
$0
Rewards Rate
Earn unlimited 2% cash rewards on purchases
Benefits
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- Can redeem rewards at an ATM for literal cash
Drawbacks
- Foreign transaction fee of 3%
- No bonus categories
- Select “Apply Now” to take advantage of this specific offer and learn more about product features, terms and conditions.
- Earn a $200 cash rewards bonus after spending $500 in purchases in the first 3 months.
- Earn unlimited 2% cash rewards on purchases.
- 0% intro APR for 12 months from account opening on purchases and qualifying balance transfers. 20.24%, 25.24%, or 29.99% Variable APR thereafter; balance transfers made within 120 days qualify for the intro rate and fee of 3% then a BT fee of up to 5%, min: $5.
- $0 annual fee.
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