23 Purchases That Shouldn’t Go on Your Credit Card
Credit cards offer convenience and rewards, but some purchases are best paid outright with cash or check.
Understanding what not to put on your credit card can save you from sliding into debt with high interest rates that spiral out of control. Some common expenses are better paid through other means to keep your budget in check.
Here are the purchases you shouldn’t charge to your credit card to protect your financial health.
Medical Bills
Paying medical bills with a credit card can quickly lead to high-interest debt, as these expenses are often large. Many medical providers offer payment plans. It’s better to negotiate a payment plan directly with the healthcare provider to avoid compounding interest on your card.
Student Loans
It’s unwise to pay student loans with a credit card due to the typically higher interest rates credit cards carry compared to student loans. Student loan providers often offer flexible repayment options. Using a credit card eliminates the possibility of benefiting from these provisions.
Mortgage Payments
Using a credit card to pay your mortgage can lead to a cycle of unsustainable debt accumulation. Most mortgage lenders do not allow direct credit card payments due to processing fees. Additionally, this can quickly increase your credit utilization ratio, negatively impacting your credit score.
Taxes
Paying taxes with a credit card incurs additional processing fees and potentially high interest rates if not paid off immediately. The IRS offers payment plans you should consider before resorting to your credit card for tax bills.
Big-Ticket Items
Purchasing expensive items that you cannot afford without credit leads to prolonged debt and significant interest charges. Saving up for it is a safer financial strategy. Using credit for big purchases should be reserved for when you can pay the balance off quickly.
Tuition Fees
Charging tuition to your credit card adds a layer of interest to already high education costs. Many educational institutions also charge a hefty fee for credit card payments. It’s advisable to seek student loans or payment plans offered by educational institutions.
Down Payments
Placing down payments for cars or homes on a credit card is risky and increases your debt-to-income ratio. High balances can jeopardize loan approvals. Saving or using other financing options tailored for such purposes is more financially prudent.
Gambling
Never use a credit card for gambling, as it is easy to spend beyond your means and incur high-interest debt. Gambling should be paid with funds you already have. Additionally, many credit card companies categorize gambling charges as cash advances, which come with high fees and interest rates from the day of the transaction.
Cash Advances
Taking out cash advances on a credit card comes with high fees and interest rates accruing immediately. Cash advances should be a last resort. Explore other lending options or an emergency savings fund first.
Vacation Expenses
Avoid putting lavish vacation expenses on credit unless you can pay them off quickly. Vacations should ideally be budgeted and saved for in advance. Using credit for vacation spending can lead to unmanageable balances that detract from the enjoyment of your getaway.
Wedding Costs
Weddings are significant expenditures that can lead to long-term credit card debt if not carefully managed. Budgeting and saving specifically for wedding expenses is more advisable than relying on credit. Consider scaling back plans or extending your engagement.
Small Indulgences
Frequent, small purchases on a credit card can add up without notice and lead to unnecessary debt. Paying for such items with cash or a debit card can help keep your budget in check.
Subscriptions
Automatic renewals for subscription services can cause forgotten expenses to accumulate on a credit card. It’s better to review these subscriptions regularly. Paying for subscriptions with a debit card can also avoid the risk of accruing interest on these recurring charges.
Business Startups
Charging the initial costs of a startup business to a personal credit card can blur the lines between personal and business finances. This practice can lead to increased personal liability. Secure separate business financing or a business credit card that can help build business credit and potentially offer rewards.
Luxury Goods
Luxury goods should not be charged to a credit card. High-ticket items can lead to long-term payments and interest that far exceed the item’s value. If luxury items are a must, consider layaway plans.
Legal Fees
Legal fees can become substantial and may tempt one to rely on credit. Instead, many lawyers offer payment plans based on income. Explore these options to manage legal costs without the burden of high-interest credit card debt.
Emergency Funds
It’s important not to rely on credit cards as an emergency fund. Saving a separate, dedicated amount for emergencies is safer and prevents high-interest debt during hard times. Start building an emergency fund with even a small regular deposit to cover unexpected expenses responsibly.
Cosmetic Surgery
Non-essential medical procedures like cosmetic surgery should not be financed through high-interest credit cards. If cosmetic surgery is desired, planning and saving specifically for the procedure is a safer financial route. Many clinics offer financing plans.
Furniture
Many stores offer financing plans for furniture and appliances that can be more advantageous than using a credit card. These plans often come with lower rates than credit cards. Always compare store financing options to your credit card terms before deciding on the best way to pay.
Pet Expenses
Unexpected pet expenses can be tempting to put on a credit card, but this can lead to high costs due to interest. Consider pet insurance. Budgeting for pet care ensures that both your financial and your furry friend’s health needs are met without resorting to credit.
Club Memberships
Annual memberships for clubs or gyms should not be put on credit cards unless they can be paid off immediately. These memberships often renew automatically. Paying such fees with direct cash or from a checking account can keep you in better control of annual spending.
Utility Bills
Paying overdue utility bills with a credit card might seem like an easy fix, but it only postpones the inevitable and adds interest to the outstanding amount. Utility companies often offer payment plans or extensions that can help manage payments without accruing credit card debt.
Costly Hobbies
Funding expensive hobbies with a credit card can lead to significant debt as hobby costs often exceed initial estimates and can grow uncontrollably. Saving up over time is a safer financial strategy. This approach helps keep spending in check and prevents hobbies from becoming a financial burden.
Josh Dudick
Josh is a financial expert with over 15 years of experience on Wall Street as a senior market strategist and trader. His career has spanned from working on the New York Stock Exchange floor to investment management and portfolio trading at Citibank, Chicago Trading Company, and Flow Traders.
Josh graduated from Cornell University with a degree from the Dyson School of Applied Economics & Management at the SC Johnson College of Business. He has held multiple professional licenses during his career, including FINRA Series 3, 7, 24, 55, Nasdaq OMX, Xetra & Eurex (German), and SIX (Swiss) trading licenses. Josh served as a senior trader and strategist, business partner, and head of futures in his former roles on Wall Street.
Josh's work and authoritative advice have appeared in major publications like Nasdaq, Forbes, The Sun, Yahoo! Finance, CBS News, Fortune, The Street, MSN Money, and Go Banking Rates. Josh currently holds areas of expertise in investing, wealth management, capital markets, taxes, real estate, cryptocurrencies, and personal finance.
Josh currently runs a wealth management business and investment firm. Additionally, he is the founder and CEO of Top Dollar, where he teaches others how to build 6-figure passive income with smart money strategies that he uses professionally.