Home > Credit Cards > 7 Times You Shouldn’t Use Your Credit Card

Comments 0 Comments

There are many great reasons that you might choose to use your credit card rather than other forms of payment. Credit cards can offer valuable rewards in the form of points, miles and cash back, and allow you to finance purchases over time. In addition, credit cards come with robust legal protections against fraudulent charges that can even cover you when you don’t receive what you pay for.

On the other hand, there are still some times when you should re-consider using your credit card. Here are seven of them.

1. Paying Tuition

There are many ways to finance your degree, but incurring credit card debt shouldn’t be one of them. Unlike student loans, credit card debt is never tax-deductible, and credit card annual percentage rates (APRs) are likely to be higher than those of student loans, which can often defer payment until after graduation. Furthermore, many colleges will actually impose a processing fee on tuition payments charged to a credit card. If you are having trouble coming up with the money to pay for tuition, meet with your college’s financial aid department and take a look at some other options.

2. Getting Cash From an ATM

Another costly place to use your credit card is at an ATM. Most credit cards will impose a much higher cash advance APR on ATM withdrawals than the standard rate for purchases. In addition, cash advances aren’t eligible to receive an interest-free grace period, so you will always have to pay interest charges. Furthermore, most credit cards subject these transactions to an additional cash advance fee of 5%. Instead of using your credit card, consider use your debit card. Even when you have to pay a few dollars in ATM fees, it will almost surely be less than the combined total of cash advance fees and interest charges imposed by your credit card company.

3. Paying Taxes

The IRS doesn’t accept credit cards directly, but it does authorize third-party processors to accept payments on its behalf. Unfortunately, these companies will impose a minimum fee of 1.87% for credit card transactions, and possibly as much as 2.25%. Therefore, these fees will likely be greater than the value of any rewards you earn from your credit card. And if you are using your credit card to finance an unpaid tax liability, you may be able to get better rates from the IRS itself. Speak with your tax adviser to learn about the payment plans offered by the IRS. And if you are using a credit card just for the convenience of paying online, use a debit card instead as it will just incur a flat fee of about two or three dollars, not a percentage of the amount paid.

4. Making a Purchase Just to Earn Rewards

Credit card rewards can be incredibly valuable, but if you find yourself making purchases just to earn rewards, then you should put your cards away. Even the most valuable rewards are just a percentage of the cost of making an unnecessary purchase. In fact, it’s not a good idea to use credit cards any time that rewards become a factor when choosing whether or not to make a purchase.

5. When You Have to Pay Foreign Transaction Fees

Most credit cards will impose a 3% foreign transaction fee on all charges processed outside of the U.S. This charge can cost you when you’re traveling outside of the United States, or making a purchase from a foreign company. When your credit card charges those fees, you still have a few options. You can use a different form of payment such as cash, or your can choose from one of the growing number of debit and credit cards that no longer imposes foreign transaction fees.

6. Wherever There’s a Credit Card Surcharge

There are many places where you might get assessed an additional charge just for using your credit card. Even when credit cards surcharges at retailers are not permitted by state laws, these charges can often be imposed by government agencies and even regulated utilities. So if you have to pay a surcharge to register your vehicle or pay an electric bill with your credit card, you can save money by using a different form of payment.

7. When You Get a Cash Discount 

Where credit card surcharges are prohibited, some retailers may offer cash discounts instead. In most cases, a cash discount will be worth more to you than any credit card rewards you might have earned.

Remember, it’s important to read the terms and conditions of any credit card you are considering before signing up, so you know what fees or APRs certain purchases may be subject to. And, if you’re in the market for some new plastic, you may want to check your credit to see if you’re likely to qualify. You can do so by viewing two of your credit scores for free each month on Credit.com.

Image: wundervisuals

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team