10. Paying Your Taxes
Although it is possible and legal to pay taxes with a credit card, there is a compelling argument against doing so. Your payment processor will probably assess a convenience fee of about 2% if you choose to use a credit card. If you owe thousands of dollars to Uncle Sam, the fee mounts quickly.
Federal law forbids the IRS from accepting credit card tax payments directly; nevertheless, the government has agreements in place with three private companies to receive and forward such payments. The additional costs for using a card range from 1.87 to 1.99 percent of the total amount paid. For instance, the additional charge would be around $100 if you owe the IRS $5,000. Additionally, not all IRS forms (though the most popular, the 1040, can), and the quantity of payments permitted through this method each year is restricted.
With integrated e-file and e-pay features, tax preparation software also accepts credit cards, but the interest rates may be even higher (2.49 percent for TurboTax, for instance).
An IRS installment arrangement, which distributes payments over up to 72 months, might be preferable to using plastic when taking processing costs and interest into account. There is a setup cost associated with these agreements, and monthly assessments of compounded interest and penalties are made. These choices might still be less expensive, though.
11. Paying Medical Bills
Why add interest to the initial sum when medical expenses may be shockingly enormous even with insurance and are the main reason for personal bankruptcy in America?
With patients or their families, hospitals and medical offices routinely set up interest-free payment plans or even renegotiate prices. Even for patients who are above the poverty threshold, the majority of hospitals offer financial aid programs.
It doesn’t make sense to charge the debt even if you can’t come up with a plan to pay it off. Late or unpaid payments are typically not taken into account when assessing credit scores since healthcare providers typically do not disclose medical debt to the three major credit bureaus — Experian, Equifax, and TransUnion.
New regulations implemented in 2017 established a 180-day waiting period before the debt appears on your credit report, and it completely vanishes the moment the obligation is discharged. This is true even if the debt has been turned over to a collection agency.
12. Small Indulgences
Every time you stop at the deli for a cup of coffee or a sandwich, it’s simple to pull out your credit card. You might get benefits like free money or airline miles based on the cash-back or rewards credit card you use for your transactions.
However, if you use your credit card for every little purchase, your amount could balloon out of control, making it more difficult to pay it off or even make the minimum payment. You’ll be left questioning whether those 20 lattes were actually worth the extra money at the end of the month.
Consider utilizing cash to make minor, discretionary purchases rather than your credit card. Because you’ll probably spend more carefully if you have to reach into your wallet every time you make a purchase, it will not only prevent you from running up your credit card balance but also help you stay to a budget.