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Expenses You Should Never Put on a Credit Card

October 28, 2011

By: Jim Oosterman
Melrose Bank

It’s a great feeling when you make a purchase with your credit card, knowing that you aren’t actually parting with any cash that day. That great feeling ends as soon as you see your credit card bill for the month and realize you charged more than you should have. While credit cards are a wonderful, useful tool for consumers, they also have the potential to create serious problems. The user can quickly build up debt without even realizing it and with added interest, some may find themselves owing more money than they can comfortably pay back. In addition, there are many safety concerns to consider when using a credit card. In order to protect your identity (and to keep you from burning through your paycheck), here are some expenses that should never be put on a credit card. 

A Large Tax Bill
Right at the top of the list, this expense should never be paid with a credit card. Receiving a large tax bill from the IRS is not pleasant. Putting the bill on a credit card will only make it more difficult to pay off the expense. It will take longer and you’ll likely be paying more due to the interest rate on your credit card. Instead, set up a payment plan with the IRS that will actually give you a lower interest rate. Owing money to the government is not a situation you want to take a chance with. It’s better to pay it off in pieces while you have the funds rather than charging it and running into potential financial problems later.

College Tuition
Paying for your own or your child’s college tuition can be daunting. Many colleges and universities expect extremely high payments for each year of school and often offer little opportunities for financial aid or a scholarship, which means you will need to find a way to pay for the majority of the tuition yourself. To begin, it’s best to apply for student loans. These loans will need to be paid back eventually, but it does give you some temporary leeway. A payment plan should be worked out well before the loans need to be repaid, so you will know ahead of time how much money you will need to set aside each month for those payments–remember, not on the credit card!

You should also conduct research to see if the school does offer any grants or scholarships. If none are available, look elsewhere. Many businesses will give away a scholarship(s) each year to qualified applicants. Even small help is better than no help at all. The best part is that you will not need to pay these back.

If you are sending your child to college, talk to them about finding a part-time job. Even with loans, scholarships, etc. it is still helpful to have some extra money coming in. Your child can use that money to help pay for their tuition, or to keep for their own expenses. This way, you will only be responsible for the tuition and they will be able to support themselves with less assistance from you. If your child begins working well before college, it may be beneficial to set up a college savings account for them. Several years of saving before college will provide you with an advantage. Using your home’s equity is another viable way to pay for college.

Vacations
Vacations are meant to be fun and relaxing, but paying for a vacation is none of the above. Often, vacations can be several thousand dollars. You may be tempted to put the expenses on your credit card and pay it off in smaller amounts. But by doing so, you could easily end up paying almost twice as much for your getaway. You could also still be paying for it when time for next year’s vacation rolls around.

Whether it is a family vacation, or you are going with friends or your significant other, start making a monthly payment into a bank account well before you begin booking your vacation. Paying for your vacation expenses in cash will allow you to come home feeling refreshed and relaxed and not dreading the arrival of the mail each day.

Special Events
When hosting a large event, you will likely be stuck paying for most, if not all, of the expenses that accompany it. A large wedding or party can make a significant dent in your bank account and many find themselves spending more than they originally anticipated. If you will be hosting a large event, start by planning out a budget. The budget should allow you to pay everything off in cash, not on a credit card. If possible, ask for monetary help from your friends or family.

Online Purchases
Making online purchases is where consumers need to be careful about identity theft and stolen account information. Since it is usually impossible to make an online purchase with cash or check, this is one situation where you have no choice but to use a card. When making online purchases, it is a wiser decision to use your credit card versus your debit card. Your debit card links right to your bank account and if a thief were to get a hold of your information, you will likely lose the only money you have available. There is a chance you may not be able to retrieve all of the stolen money either; credit cards offer more protection against fraudulent charges than debit cards.

When making online credit card purchases, follow these guidelines to keep your credit card information safe:

  • Shop only at sites you trust–if you have used the site before and have not had any problems, the site should be trustworthy.
  • Don’t make online purchases from a public place–public computers and networks are less secure. Your credit card information can even be stolen when you use your personal laptop on a public wireless network.
  • Protect your computer from viruses and hackers–install and consistently update anti-virus and anti-spyware software onto your computer to protect your information.
  • Make sure the credit card entry page is secure–look for "https://" instead of "http://" in the URL address.
  • Print your online credit card receipts–compare the amount on your receipt to the amount on your billing statement to make sure the totals match.

To make smart credit card purchases, it’s best to take your time when considering a purchase and avoid impulsiveness. Expenses can add up quickly and if money is tight, you could be paying off your credit card debts for a long time.

James Oosterman is the Vice President of Melrose Bank. He can be reached by telephone 781-665-2500, online at melrosebank.com or on Facebook at facebook.com/MelroseBank.


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