Even though building credit and racking up rewards can be great for your finances in general, there are some things you should never put on your credit card because you can incur big fees and higher interest rates. Avoid putting the following expenses on credit cards:
If you have ever wondered, "Can I pay my mortgage with a credit card?" the answer is maybe, but that doesn't make it a good idea. For one, some mortgage companies won't let you make direct payments with a credit card. Some third-party companies will help you use your credit card to pay your mortgage, but they often charge fees. And charging a large amount to your credit card will lower the amount of credit available to you, which could lower your credit score.
Sure, it can be convenient to whip out your credit card whenever you buy a cup of coffee or a sandwich. But if you swipe your credit card for every small purchase, your credit card balance could grow out of control. And the higher your balance, the harder it will be to pay off or even afford the minimum payment. Plus, some store owners will charge a fee for purchases typically less than $5. Instead, consider using cash for small purchases.
A cash advance is a withdrawal or a short-term loan in which you are borrowing against your credit card account. If possible, avoid taking a credit card cash advance — or else you might be subject to high fees and interest rates. Your interest rate and fees will vary depending on your bank and credit card issuer, but in general, the interest rate on a cash advance is higher than a purchase interest rate. Cash advances should be for emergencies only.
Some strong arguments exist for putting household bills — such as utilities — on a credit card. Your department of water and power, for example, might let you pay your bills online with a credit card without being charged a fee for the service. Still, relying on credit cards to pay too many of your household bills could get you in financial trouble. Consider linking your debit card instead. But again, make sure you regularly watch your checking account.
One of the worst things that you can do is put medical expenses on your credit card. Medical care is expensive, and paying for it with a credit card that charges high interest on top of this could be a bad idea. Instead, contact the hospital's financial office and see if you can set up a payment plan or negotiate bills. Chances are, you will pay less in interest to the hospital than your credit card issuer will charge you.