Credit cards are one of the most popular ways to shop, and it’s easy to think of them as just another alternative to a debit card or cash. But they’re not the same. Credit cards charge high interest rates if you can’t pay your bill in full at the end of the month, and once you fall into this debt cycle, it’s tough to get out.
There’s little you can’t charge to a credit card, but there’s a lot you probably shouldn’t charge to a card if you can avoid it. Here are five things you probably want to finance another way.
1. Cash advances
Credit cards often permit cash advances — that is, they let you borrow against your credit limit and receive cash you can use to make other purchases. It’s a bit like a loan, but it comes at a much higher price.
Credit card cash advances have a fee that’s often a percentage of the cash advance. Cash advances may also have higher interest rates than purchases, and there’s no grace period. That means that you don’t have that one-month wait before interest charges kick in. Your cash advance will immediately begin accruing interest, which can make it difficult to pay back.
2. Tuition payments
Some universities enable students to pay tuition costs using a credit card if they don’t have the cash on hand. This offers a certain measure of convenience, but there’s an extra fee associated with this. That can increase your balance, making it even harder to pay off.
Explore other options before using a credit card for tuition. If you have to go this route, familiarize yourself with the school’s credit card payment fee so you can be prepared.
3. Medical bills
Medical bills can quickly amount to thousands or tens of thousands of dollars, even from a single visit. You may not have the cash you need to pay this off when you first receive your bill, but a credit card isn’t your best option because you’ll pay a lot in interest.
You’re better off contacting the hospital and enrolling in a payment plan if one is available. Generally, you won’t face any interest charges as long as you continue to make regular payments toward your balance.
4. Gambling
Most credit card issuers don’t permit you to use your card for gambling purchases. They see this as too risky. But there are a few lenders that make this available to customers.
Even with these cards, gambling purchases, like lottery tickets or online sports betting, are often treated as similar to cash advances. This means you could face an additional fee, a higher interest rate, and no grace period on these purchases.
5. Any large purchase you cannot afford to pay back by the end of the month
Cash back and travel credit cards offer benefits if you’re able to pay your balance in full by the end of the month. But when you can’t, the interest you’ll pay over time will likely outweigh any benefit you get from the card’s perks.
Sometimes, in a pinch, you may not have another option. But if you’re concerned about your ability to pay for an item, you’re better off waiting to make the purchase or finding another means to finance it, like taking out a personal loan.
