Credit cards are useful tools for spreading the cost of purchases, building your credit score, and protecting yourself from fraud. However, some things shouldn’t be charged to a credit card and are better suited to your debit card.
Vacation Expenses
Travel costs often quickly spiral out of control without a strict budget and a reliance on credit cards. Budgeting and taking out a set amount of cash for the day or week is better when spending on vacation.
Medical Bills
Medical bills are often unexpected, so paying for them with a credit card may be tempting, but the high interest rates could amplify the costs. Negotiating a payment plan directly with your medical provider is often better. Priya Malani of Stash Wealth warned against it on CNBC, arguing, “These charges don’t belong on a credit card, even if the doctor or hospital suggests you use one.”
Luxury Goods
Luxury goods, whether clothes, accessories, or appliances, can be highly expensive and quickly max out your credit limit. They’re usually unnecessary expenditures that can lead to severe financial instability.
Cash Advances
Cash advances come with high fees and usually immediate interest charges, with higher rates than regular credit card purchases. Their lack of a grace period can quickly lead to debt accumulation and financial instability.
Gambling Expenses
Gambling losses often quickly accumulate and leave Americans in significant debt. Credit card providers can also flag frequent gambling transactions as risky behavior, so they’re best avoided.
Utility Bills
Many utility providers allow customers to pay monthly bills with a credit card, but it often comes with a convenience fee. It’s usually not worth it unless you’re in a secure financial position and aim to maximize your reward earnings.
Taxes
It’s possible to pay taxes you owe to the IRS with a credit card, but it has significant downsides. CNBC explains that it comes with a processing fee, unlike an automatic bank transfer or check, and “can also hurt your credit score by spiking your credit utilization rate.”
Non-Essential Subscriptions
Monthly subscriptions for services like Netflix and Amazon Prime can quickly add up and become unmanageable with a credit card. It’s also easy to lose track of multiple subscriptions, so unsubscribe from any you don’t regularly use.
Automobile Down Payments
Car loans offer lower interest rates than credit cards, making them a more practical option for down payments on new vehicles. However, using your credit card for the down payment can also reduce the amount of available credit for emergencies.
Home Renovations
Large home renovation projects often exceed budget and take longer than planned, making them ill-suited for credit cards. They could quickly max out your credit limit and inflate the project cost.
College Tuition
Paying off your college tuition fees with a credit card isn’t directly possible, but there are workarounds. However, these can quickly accumulate substantial debt, so it’s best avoided. U.S. News notes that using a credit card for private loans is possible but will result in “fees that could erase rewards value.”
Wedding Costs
Weddings are often extremely costly, and couples often rely on family members to pitch in to help with their financing. It’s better to save in advance and budget for them than to rely on debt-accumulating credit cards.
Business Expenses
Mixing personal credit with business expenses can unnecessarily complicate finances, so it’s best avoided. Business loans often offer better terms than credit cards, which can hinder profitability with high interest rates.
Groceries
Occasionally, using your credit card for grocery expenses can be useful. However, if it becomes a weekly habit, it can quickly accumulate debt, so it’s best to stick to a budget and use debit cards.
Mortgage Payments
Mortgage lenders typically don’t accept direct credit card payments. There are ways around this, but paying with an automatic bank transfer is better. Experian argues that “the fees and high interest rates may make using a credit card a poor option.”
Clothing and Accessories
Impulse buying clothes, shoes, and accessories from thrift stores or during online sales with a credit card may be tempting, but it’s best avoided. Saving for specific items you’ll regularly wear and paying for them with a debit card won’t lead to unnecessary debt.
Entertainment
Frequent credit card charges for movies, concerts, and dining out can accumulate and spiral out of control. The interest on the credit card debt can make it harder to pay if it accumulates, so stick to a budget for entertainment and use a debit card.
Personal Loans
Using a credit card to pay off a personal loan could worsen your financial health and lead to a cycle of debt and high interest rates that are difficult to escape. Sticking to a payment plan from a debit card is a better idea.
Cryptocurrency Purchases
Credit card companies, including American Express and Capital One, treat cryptocurrency purchases like cash advances, which can make them expensive. Cryptocurrencies are also often volatile, which increases the risk of losing money when using a credit card.
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