It goes without saying that Credit Cards make purchases all too convenient, especially now that to Find a Credit Card Online hardly takes time or effort. However, once you become a credit cardholder, while you enjoy its numerous benefits, it’s also prudent to remember that not all purchases should be made on your card.
With the rapid evolution of a cashless society, the outstanding debt on Credit Cards has also increased. People who do not use their cards judiciously are burdened with card debts. This, therefore, calls for the prudent use of your cards, particularly the following items that you should never charge to plastic.
- Cars: The urge to buy that fancy automobile is too strong, but the funds aren’t available. Why not use my SBI Credit Card or other Credit Cards. Mistake number one. Some people even claim that paying for a car earns them a great many points. Moreover, if they pay their card bills on time, no interest charges are payable. However, it has its pitfalls, too. Since 30% of a card holder’s credit score comprises their credit balance, incurring a balance that’s too high as compared to your credit limit might make your score sip substantially. It becomes more problematic if you default on your payments because of losing control over your account’s balance. So if you’re cash-strapped, delay your purchase. Alternatively, find a new car or used vehicle which is more affordable. Also, you can apply for a Personal Loan or auto loan instead.
- College Tuition Fees: Paying for your education using Credit Cards is strictly a no-no. This is principally because student loan interest is generally lower. Additionally, tuition fees will make your credit utilisation ratio spiral and simultaneously lower your credit score. Moreover, educational institutions often add an extra 2-3% processing for payments made with cards. Since college tuition can be expensive, making payments with a card is unadvisable and defaults in payments will only lead to additional interest. It’s only better that you go for low-interest student loans, scholarships, grants or work-study programs that are available to fund your education.
- Medical Bills: With healthcare costs spiraling by the day, avoid paying medical bills using Credit Cards. Instead, opt for no-interest or low-payment plans that hospitals provide or negotiate for lower bill amounts. For those who lack ready funds, paying healthcare bills with a card could be one of the most dangerous things to do because medical care being expensive, high-interest rates could raise costs substantially in the long run. It’s only advisable that you ask the hospital for a suitable payment plan or negotiate on the bill. This will lead to your paying much lesser interest to your healthcare provider than what your credit card issuer would charge you.
- Payments for Mortgages: The usual practice among most lenders of Home Loans is that they don’t accept your mortgage payment instalments by Credit Cards. However, there are numerous third parties who are willing to help you out, albeit for a fantastic fee. Moreover, the default on the month end Credit card balance will only compound the mortgage debt further, eroding your available credit substantially and negatively impact your credit scores. So it turns out to be a losing situation all the way for you and definitely more expensive. This is also applicable in the case of property tax payments where a convenience fee of 2-3% of the total tax amount is also payable.
- Income Tax: Paying income tax with a Credit Card is yet again unadvisable. You will be charged a merchant processing fee of up to 2% and using third-party software for filing your returns will cost you even more. The best alternative is to take a short-term loan.
In sum, the basic thumb rule is to avoid using Credit Cards for the purchases that you are unsure of paying off entirely at the month end.
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