Credit cards can be a savior and a killer. Most wonder what is good to charge and what is not good to charge, here is a list of what is considered a credit card charge that is best vs worst a road map to follow in your charges. Most cards have relatively high interest rates as compared to other loans and to charge certain debts as opposed to others just makes no sense at all, or “cents” if you will. Here are some best, and worst to charge.
- Taxes (worst)
- Online Purchases (best)
- Medical Bills (worst)
- Travel (best)
Now as with any list this is only a rule of thumb, and not some sort of hard and fast black and white rule. You should take into consideration your income, your debt to asset ratio, you debt load and your long and short term goals. If you just look at the best and worst without looking at your individual situation and budget, then you are missing the point.
It is not the tax debt that itself is a bad thing to charge, but the fees that go along with using third parties services to charge the debt or use a debit card, these fees are in the range of two to four percent per charge and could end up costing your more, in addition, if you do not intend to pay the card off in the next month, the contract interest rate on the card on the outstanding debt, which could be as high as twenty five percent, ouch. But if it is a mere timing issue, then charging it may make sense, and be worth the few extra bucks. But as a general rule, it is not good to charge your tax debt.
One Line Purchases
This on the other hand is a no brain-er, with the protections that card companies give to users for fraud and other on line protections why would anyone use a debit card or other account tied to their checking or savings accounts. Plus, most cards will offer reward points and discounts for purchases offering another level of protection and savings a bank account will not. In addition credit card companies have whole fraud departments to investigate theses disputed charges. According to cardhub.com in 2012 there was $11.27 billion in credit card fraud losses. Protecting yourself by paying with your credit card is essential and one of the best charges that you can make on your credit card.
According to forbes U.S. healthcare has hit $3.8 trillion. If you think that is high, well you are right, and that reflects direct costs to you the consumer, and as overwhelming as that is often times we charge those to our credit cards. That is not a good move and can cost you hundreds in interest. A better way of course is to have good medical coverage and take care of that with a low co pay or complete coverage. But if you cannot do that don’t charge it, ask the hospital if they have a payment plan and if they do take advantage of it, it will usually be far less interest than your credit card, and maybe even zero interest, cannot beat that. These are the worst credit card charges that you can make.
Travel Related Charges
Another good thing to charge on your credit card is travel related costs. Some use their cards for a whole trip rather than taking large sums of cash with them, they will set that money aside and leave it at home, so to speak and charge the whole trip, flight, hotel, car, meals, entertainment everything, and the great benefit of this is the travel miles and points that you can accrue with all those purchases, that can be a tremendous savings towards your next trip and give you piece of mind from a fraud perspective. Much like the on line purchasing mentioned above, you can protect yourself and in a lot of instances get additional travel insurance and coverage the you would not otherwise have by using your credit card.
These are just a couple of the good and bad things to charge on your credit card but they are the big ones. One other that is not a good idea is college expenses, student loans offer far lower interest rates and deferred payments while credit cards have immediate payments and higher interest rates, and some even limit the amount you can put on the charge at an educational institution.
If you are smart, and pay attention to what you charge on your credit cards they can be a wonderful financial tool and they can aid you in the way you manage and budget your money, you can use them to safely buy goods and services and travel, while avoiding unnecessary costs and expenses.