Keep your card in your wallet and find a different way to pay for these five things.
Credit cards are a great go-to payment method for most purchases because they give you rewards and they offer fraud protection, which keeps you from being liable for any purchases that someone else makes in your name. But there are a few times when you're better off leaving your credit card in your wallet and opting for a different payment method instead, or avoiding the purchase altogether. Here are five such scenarios.
1. Anything you can't pay back at the end of the month
The biggest drawback to using credit cards as your primary payment method is that if you are unable to pay back your full balance by the due date, the remaining balance will begin to accrue interest. Interest rates on credit cards are typically much higher than the interest rates you find on loans, and in some cases they can be in excess of 30%. If you continue to charge new purchases to your credit card the following month and only make minimum payments, you could actually see your balance grow rather than shrink over time.
2. Anything on an unsecure website
Just because you won't be held liable for fraudulent purchases, it doesn't mean you should tempt fate. Never shop on unsecured websites with your credit card or any other payment method for that matter. Unsecured websites do not encrypt your personal and financial information, so it's easy for hackers to get a hold of them. They can use your card to make their own purchases on another site and if you're not checking your credit card statements regularly, you could miss them and end up paying for items you didn't buy.
Only enter your credit card information on secure websites that begin with "https" instead of just "http." Secure websites also have a small lock icon near the URL bar to indicate that your information is encrypted. If you find an item you'd like to buy on an unsecure website, do some research and try to find it on a secure site instead.
3. Student loans
Putting your student loans on your credit card might seem like your only option if you're struggling to keep up with your payments, but this is a bad idea because of the high interest rates I mentioned above. Explore all other reasonable options first before paying your student loan with your credit card.
Federal student loans often have multiple payment plans, including some income-driven repayment plans that are based on your monthly income. See if you can switch repayment plans if you're struggling to keep up with your current payments. You could also try deferment or forbearance, both of which temporarily pause your student loan payments if you qualify. Private student loans may not offer these perks, but you might be able to refinance your existing loans to get a more affordable monthly payment.
4. Medical bills
Medical bills can also be costly, but putting them on a credit card will only make them more expensive. Your first step if you get a medical bill you can't pay is to look over the bill to make sure that everything is accurate. If you notice charges for services or treatments you never received, dispute this with the hospital and request a more accurate bill.
Most hospitals will enable you to set up a payment plan if you're unable to pay your full bill all at once and some may offer interest-free payment plans or a discount if you pay your full balance within a certain number of days. Explore all of these options first. Don't be afraid to negotiate. The worst they can say is no.
The government also enables you to set up payment plans if you're unable to pay your full bill when you file your return. You will probably have to pay some interest, but it'll be a much smaller amount than you would have to pay if you used your credit card to cover your bill. File your taxes by the April 15th tax deadline to avoid the failure-to-file penalty and then contact the IRS to discuss your payment options.
Credit cards are great for everyday payments, but they're not right for the five situations above. Try one of the alternative payment methods listed here to keep yourself out of credit card debt.