It doesn’t pay to charge some things.
- I make nearly all of my purchases using a credit card.
- There are a limited number of things I would never charge, though.
- This includes stock purchases and my mortgage payments.
I have a credit card with a great rewards program and I charge almost all of my purchases on that card in order to maximize my cash back.
But while I swipe the card to pay for everything from groceries to my electric bill, there are three things I would absolutely never charge. Here’s what they are.
I invest regularly, purchasing stocks and ETFs often. But I don’t ever pay for stocks with a credit card and I never will. There are a few reasons for this.
First, most brokerages don’t allow you to use a card to buy stocks. And in situations where it is possible, there are costly fees charged. Perhaps even more importantly, I don’t want to borrow to buy stocks because I would have to pay interest charges that eat away at my returns.
There’s also another big reason why I would never consider buying stocks on a credit card. If I did that and then my investments ended up losing money, I would still have to repay what I owed (along with any interest charges accrued). So I’d be paying interest to repay money that I lost. I don’t want to take that chance.
2. Mortgage payments
I make mortgage payments monthly, but I would never consider paying my mortgage with a credit card either.
My bank, and most other mortgage lenders, do not accept credit card payments so I would have to jump through hoops if I wanted to use my cards to pay my home loan. This would involve using a third-party service. And that service charges fees. It’s not worth paying a fee to use my cards to cover the cost of my home loan – especially since the fees would dwarf the value of rewards I could earn.
My mortgage is also at a much lower interest rate than my credit cards would charge. And because my husband and I itemize when we file taxes instead of claiming the standard deduction, I can deduct the interest I pay on my loan. I wouldn’t be able to deduct the interest charges on a credit card if I paid my mortgage with one.
There’s no reason to switch to higher cost, non-deductible debt by putting any portion of my mortgage onto a credit card – especially since I’d get hit with added fees to do so.
3. Splurges I can’t afford
Finally, the last thing I would never consider charging on a credit card is splurges that I cannot afford. This includes anything that I couldn’t pay off in full when my statement was due that isn’t an absolute necessity.
I would not, for example, consider charging a vacation or a big purchase on a card. I’d either pay cash for these purchases (which is the ideal option and what I do most of the time), or I would use a cheaper form of debt such as a personal loan if I had to fund them over time because I couldn ‘t pay upfront.
Ultimately, before charging anything, I want to be sure I can afford to repay what I’m charging in full and to make sure I won’t be hit with added fees or interest that make my purchase costlier. If that’s not the case, I won’t charge the purchase.
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