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January 27, 2016 - 3 Things You Should Never Charge to a Credit Card

January 27, 2016

Many of us take advantage of credit cards to make everyday purchases and smooth out cash flow. However, you shouldn’t always reach for plastic. Here are three types of expenses that you should never put on a credit card:

Tuition and college expenses

Many students get their first credit card during their college years. When money is tight, it can be tempting to simply charge expenses like tuition, deposits, book fees, and other costs. However, many students underestimate the cumulative effect of interest charges and the difficulty of paying off debt. While many expect to be able to pay off their bills as soon as they graduate, many graduates struggle to find well-paying jobs immediately, putting off repaying the debt even more.

A better solution: Instead of charging your college expenses, take a look at your student loan options. Student loans typically offer much more competitive rates than credit cards and can often be used to pay for more than just tuition.

Medical bills

If you don’t have enough emergency savings and are confronted with unexpected medical expenses, it can seem sensible to put the bill on your credit card. However, if you’re not able to pay off the entirety of the bill quickly, you could rack up expensive interest rate charges. Also keep in mind that medical debt is weighed differently in your credit score than other forms of debt. So, while you don’t want to have unpaid debt hanging over your head, a medical bill is less detrimental to your long-term finances than a credit card bill.

A better solution: Instead of reaching for your credit card, see if you can set up a payment plan with your doctor’s office. A negotiated plan may reduce your overall bill and break it down into affordable payments.

Your tax bill

If you find yourself with a large tax liability, think carefully before putting it on your credit card. Though the IRS makes it easy to pay with a credit card online, the fees and interest expenses can quickly add up.

A better solution: The IRS offers structured payment plans to help taxpayers meet their tax obligations. While the interest rates associated with underpaying your bill vary, they are typically much lower than credit card. Taxpayers can find out online whether they qualify for a short-term payment extension or a payment plan through the IRS.