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The Points Guy believes that credit cards can transform lives, helping you leverage everyday spending for cash back or travel experiences that might otherwise be out of reach. That's why we publish a variety of editorial content and card comparisons: to help you find a great card to turn your goals into reality.
Our site may earn compensation when a customer clicks on a link, when an application is approved, or when an account is opened with our partners, and this may impact how or where these products appear. While we don't cover all available credit cards, our editorial team creates and maintains all of the analysis of these cards, and our content is not influenced nor subject to review by any credit card company, bank or partner prior to (or after) publication. Please view our advertising policy and product review methodology for more information.
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13 expenses that you should not put on your credit card
Katie Genter is a digital nomad who has traveled full time since June 2017. She writes and edits stories about points and miles, and loyalty programs, often letting her personal experiences color these stories.
June 2, 2021 • 13 min read
The cards we feature here are from partners who compensate us when you are approved through our site, and this may impact how or where these products appear. We don't cover all available credit cards, but our analysis, reviews, and opinions are entirely from our editorial team. Terms apply to the offers listed on this page. Please view our advertising policy and product review methodology for more information.Editorial disclaimer: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.
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Quick summary
The article outlines purchases that may not be ideal to put on a credit card if you cannot pay the balance in full before interest accrues.
Examples include taxes, medical bills, tuition, student loans, rent, cash advances, large purchases near your credit limit, impulse splurges, gambling, wedding expenses, vacations, vehicle purchases and discretionary spending.
Fees, surcharges and high interest rates can quickly outweigh any rewards earned from these transactions.
Alternative payment options, such as payment plans or direct pay, may be more cost-effective for certain expenses.
What to consider
Many transactions, like taxes or rent, incur processing fees of 1.96%-3% when paid by credit card, which can negate potential rewards.
Cash advances and gambling charges often start accruing interest immediately and may not earn rewards.
Large purchases can increase your credit utilization ratio, potentially impacting your credit score until the balance is paid down.
What you'll miss from the article
A detailed breakdown of when using a credit card for specific expenses is worthwhile and when alternative payment methods are preferable.
Generated by AI with support from our editorial team.
Update: Some offers mentioned below are no longer available. View the current offers here.
It can be tempting to use a credit card to pay for expenses you usually wouldn’t (or couldn’t) pay for with cash or a debit card. But, whether you’re working to pay off debt or want to stay out of credit card debt, it’s best to avoid using your card for anything you can’t pay off before you begin accruing interest.
To be clear, I’m not saying that the following purchases absolutely should not be put on a credit card. After all, here at The Points Guy, we are all about earning rewards. But, it's best to use credit cards responsibly. As such, you’ll generally only want to put the following types of purchases on a credit card if you pay off your statement balance in full each month or if you have a 0% APR offer and will be able to pay off your balance before the promotional period ends. And you should consider whether any surcharge you’d incur for using a credit card is worth the rewards you’d earn.
Now, let’s dive in and consider some potentially troubling credit card purchases that you may want to avoid.
Taxes
(Photo by Natee Meepian/EyeEm/Getty Images)
If you owe taxes to the federal government, you can pay using various methods for no additional fee. For example, you won’t need to pay any processing fees to pay your taxes if you mail a check or use Direct Pay from a bank account.
You can also pay your taxes with a credit card. But, you’ll pay a fee between 1.96% and 1.99%, depending on the processing service you choose. Although no credit card bonus categories cover tax payments, some everyday spending credit cards may provide a high enough return to justify using a credit card -- assuming you can pay off your balance before accruing interest.
If you aren’t able to pay your balance before accruing interest, it may be better to use one of the options provided by the IRS. For example, you could apply for a payment plan, ask for an offer in compromise or request that the IRS temporarily delay collection until your financial situation improves.
When you receive a medical bill, it can be tempting to simply put it on a credit card to consolidate your debt. And it’s possible to earn ample points and miles on healthcare spending. But, if you won’t be able to pay your balance in full before you start accruing interest, you should consider your options before charging these expenses to your credit card.
First, check that the medical bill is correct and any insurance you have has been factored in. Then, if you cannot pay the bill outright, it may be worth calling the number on your invoice to discuss your options. You may be able to negotiate a lower payment or a payment plan that will charge you less interest than your credit card APR. Some medical providers may even be willing to set up an interest-free payment plan.
Some schools allow students and their families to use credit cards to pay tuition. If you’re able to pay your credit card balance off in full before you start accruing interest, paying tuition with a credit card can be a great way to rack up rewards. Otherwise, you’ll want to consider other options.
Many schools offer monthly payment plans as well as merit and need-based scholarships. You may also be able to apply for a student loan with a low-interest rate -- but you’ll want to pay this loan off before the interest rate increases.
If you took out student loans to pay for school, you might now have a large amount of debt that continues to accrue interest. You typically can’t use a credit card to directly pay your student loan payments with the student loan servicer or lender. And, even if you can use a credit card, you may face transaction fees or cash advance fees. Likewise, you could use a third-party payment service such as Plastiq, but these services also charge transaction fees that may outweigh any rewards you’d earn.
So, if you want to use a credit card to pay your student loans, you should consider the fees involved in doing so. Also, make sure you’re able to pay off your credit card in full before you start accruing interest on the balance. Alternatively, you may be able to refinance and consolidate your student loans to obtain a lower interest rate, especially if you have good credit. Or, you may want to consider whether your student loan is eligible for income-driven repayment, deferment or forbearance.
(Photo by Amanda Andrade-Rhoades/The Washington Post/Getty Images)
It is rare to find a way to pay your rent or mortgage with a card without paying additional fees. Instead, you’ll usually need to use a third-party service provider like Plastiq if you want to pay your rent or mortgage with your credit card. You can generally expect to pay a fee of 2.5%-3% for this service. So, even if you can pay off your statement balance in full before you begin to accrue interest, the rewards you’d earn may not justify the fees you’d incur.
Although many credit cards advertise that you can withdraw money from an ATM using your card and send you convenience checks, you’ll usually pay a cash advance fee when you use these services. Plus, you typically won't earn points on transactions that code as a cash advance. But you will start accruing interest -- often at a high APR -- as soon as you get a cash advance.
So, you should avoid cash advances. If you need cash now, it's better to use your debit card to withdraw money or borrow money from a friend or family member.
Large purchases that put you close to your credit limit
(Photo by cnythzl/Getty Images)
Credit cards can be useful for making large purchases, especially if you have access to a 0% APR offer. But, one downside to making a large purchase using your credit card is that you’ll increase your credit utilization ratio. Your credit utilization ratio is your current amount owed over your available credit. Generally, you should keep this ratio below 30%.
So, when you make a large purchase that puts you close to your credit limit, your credit utilization will increase, which may cause your credit score to decrease. Of course, if you pay off your credit card balance quickly, the long-term effect on your credit score will generally be insignificant. But, you also face an increased risk of going over your credit limit as your balance approaches your credit limit.
Unaccounted-for splurges are an easy way to end up with a higher credit card bill than you expected. Impulse splurges will involve different types of purchases for each of us, such as sporting equipment, clothing, shoes or trips. If you have the finances to cover these splurges, they may be just an inconvenience to your budget.
But, if you’re short on money or already in debt, impulse splurges can cause you issues and should be avoided. To reduce impulse splurges, you may want to make a budget, avoid shops or situations that usually lead to impulse purchases and only provide yourself a set amount of cash each month for fun purchases and splurges.
The primary issue with using a credit card for gambling is that banks typically code gambling as a cash advance. After all, most credit cards consider gambling charges to be a cash equivalent, regardless of whether you use your credit card to fund online gambling or at a casino to withdraw cash. As discussed earlier, cash advances usually incur fees and you’ll start accruing interest immediately on the amount of the cash advance. So, you’ll generally want to bring cash or use your debit card to fund any gambling you plan to do.
It’s also worth mentioning that it can be easy to get caught up in the gambling experience and spend more than you can afford. So, it’s best to set a maximum that you will spend while gambling and stick to this limit. And, if you can't stick to your limit, it may be best to avoid gambling altogether.
Weddings are one type of event where some consumers are willing to drop a lot of money. But, you won’t want to put your wedding expenses on a credit card if you won’t be able to pay it off before you start accruing interest.
You could also consider saving up or having a lower-cost wedding. Or, if you are starting a new, higher-paying job after your wedding, you could use a 0% APR credit card to pay for wedding expenses and then pay off the card before the end of the 0% APR period.
Vacations can be an excellent way to recharge and reconnect, but they can also get expensive. You shouldn’t pay for your vacation using a credit card if you won’t be able to pay off the balance before you begin accruing debt.
If you want to purchase a vehicle, it can be tempting to use a credit card to earn rewards for some or all of the vehicle purchases. But, you’ll only want to use a credit card if you’ll be able to pay off the balance before you start accruing interest. Otherwise, you’ll end up paying an interest rate many times higher than what it would cost to finance the vehicle.
Whether you’re looking at a new TV or a luxury vacation, you should avoid putting discretionary purchases on a credit card if you won’t be able to pay off your credit card balance in full. Instead, it’s better to save up the money you need before making the purchase. This way, you can avoid paying interest on your balance while you work to pay off the expense.
Of course, once you have the necessary money saved up, you can put your purchase on a credit card to earn rewards. Just be sure to pay your balance in full when you pay your credit card bill.
Credit cards can provide valuable rewards that can put cash back in your wallet or fund amazing trips. But, if you’re paying interest on your credit card balance, these rewards won’t be worth the interest you’re paying. So, a general rule of thumb -- especially for non-essential purchases and purchases that you can finance at less-expensive rates through other means -- is to only use your credit card if you’ll be able to pay off the balance in full before you start accruing interest.
Comments
By commenting, you agree to our Community Guidelines to help create a positive space for conversation. The responses below are not provided or commissioned by the bank advertiser, our partners, or The Points Guy (“TPG”). They have not been reviewed, approved, or otherwise endorsed by any of these parties. All responses are submitted by individual contributors, and neither the bank advertiser, our partners, nor TPG are responsible for ensuring that all posts and/or questions are answered.
