Responsible credit card use is critical to maintaining your good credit rating. Avoid paying these things with credit cards in order to keep your financial stability. Read on!
Responsible credit card use is critical to maintaining your good credit rating. Avoid paying these things with credit cards in order to keep your financial stability!
It can be tempting to buy a car using your credit card, as it provides the false sense that you can get the car of your dreams and pay for it later. You may even be happy that you’re racking up lots of rewards on your card's program. But in the end, this expensive purchase can put you in a difficult position, as you could be facing high-interest payments if you can’t pay off your balance by the due date. Your car will end up costing far more than you planned to spend on it!
2. Cash Advance
Credit cards allow you to take a cash advance, and it's a tool to take into account in emergency cases. But don't use it if you can prevent it! Borrowing that money is going to be incredibly expensive: interest rates on cash advances are significantly higher than the average, and you'll also have to pay fees that are added to this amount. If you’re short of money, try to use another source to lend some.
3. Mortgage Payments
Although many mortgage companies don't accept down payments with credit cards, there are others that allow you to pay this way, and they even encourage it as the card acts like a payment guarantee. Doing this can lead to big problems, especially if you have a higher credit limit on that card. First of all, you'll pay an extra fee for this service. If you were unable to pay off your balance in full, you will start having a big debt.
If you already are in debt, read this article to see how to pay credit card’s high-interest debts!
4. Startup Costs
If you're starting a new business, avoid turning to your credit card as a financing source. You'll have to face a lot of startup costs, and maybe your savings aren't enough to cover them. If you use your personal credit card to pay for them, they'll become a long-term problem. It can take some months until your new company makes profits; meanwhile, your credit card balance can pile up a lot of interest. If need some startup money, you should take out a business loan, or look for a funding partner.
5. Utility Bill Payments
You can pay your monthly utility bills like gas, electricity, Internet, cable TV, and others with your credit card. It’s also possible to set up for automatic payments with these services providers. However, it may not always be the best idea to link your credit card to your utility accounts, because some of them can charge you with a fee for using this option. On the other hand, you'll have less control over your expenses. As you're automatically paying the bills, you may forget to check on them. Check these situations when you should cancel automatic payments! You can get the same convenience by linking your bills with your debit card, which assures you won’t end up in debt.
6. Medical Expenses
Your health insurance doesn't cover all expenses and you may find yourself in a situation where you have to pay for some medical treatment. If you charge this amount to your credit card, you'll pay way more than the doctor or the hospital is actually charging you. That is due to interest and possibly late fees. Those, in addition to penalties, will be incurred if you’re unable to pay off your balance on time. So, you should try to negotiate with your health insurance company to include the treatment you’ll receive and finance its costs. Another option is to set up an installment plan to pay off what you owe over the course of a few months. That can certainly make it easier to pay off your medical expenses.