Credit cards are convenient and easy to use. But it’s not always the best money move to swipe your credit card for everyday purchases. For some purchases, you may pay more or miss out on additional discounts if you use a credit card. I’ll outline a few scenarios where you should avoid using your credit card as payment.
1. Utility bills that charge fees for using a credit card
Some utility companies allow you to pay your bill with a credit card. But often, you’ll be charged extra fees. Before paying your water, electricity, or gas bill with a credit card, check for this.
Let’s imagine your monthly electricity bill totals $150. If your service provider charges a 2% credit card payment fee, you’ll pay an extra $3 monthly or $36 annually. This is money you could spend elsewhere. Reconsider swiping your credit card for expenses like this if you can avoid it. Every dollar you spend on fees adds up.
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2. Bills that offer autopay discounts for bank account-funded payments
Many companies offer discounts to customers who enroll in autopay billing. Customers who elect to have their bills automatically paid, benefit service providers because it ensures their bills are paid on time. But some companies have outlined restrictions for autopay discounts.
You may be required to set up automatic payments with a checking account or debit card instead of a credit card. Otherwise, you may be ineligible for a discount on your monthly bills. Companies likely do this to avoid paying fees on card payments.
Check to see if you’re missing out on service discounts like this because of the payment method you’re using. Paying your bill with money linked to your bank account instead of a credit card could allow you to get a better deal on some expenses, like your phone or internet service.
Discount amounts vary. I save $120 per year on home internet costs because I have automatic payments enabled through my checking account. That’s a significant amount of money saved.
3. Cash withdrawals
Have you ever visited a business and realized it doesn’t accept credit cards? We’ve all been there and it’s a frustrating experience. Some companies only accept cash payments to avoid having to pay credit card processing fees. This can be frustrating if you don’t have any cash.
Stopping at a nearby ATM to get cash? Don’t use your credit card to get cash out at an ATM. Why? Your credit card issuer will process your cash withdrawal as a cash advance.
Credit card companies commonly charge cash advance fees of 5% (or a minimum of $10) for every cash advance transaction that is posted to your credit card account.
You should use a debit card. This way, you won’t have to pay a cash advance fee. You may still be charged an out-of-network fee if you use an ATM that isn’t associated with your bank.
A winning strategy to avoid added fees is to take out cash every so often when you’re near a local bank branch or an in-network ATM. If you always have cash in your wallet, there’s less worry about stumbling upon a cash-only establishment.
Know when to use a credit card
Credit cards can be a useful tool. And by using reward credit cards, you may come out ahead on your credit card spending. But knowing when to use a card as payment can help you avoid additional fees. There may be times when it’s better to use a different payment method.
