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Credit cards are a flexible and convenient payment tool. Using a credit card allows you to earn rewards, receive protection for purchases and access valuable perks. However, they're not the best option for certain expenses. Transactions you may want to avoid putting on a credit card include rent or mortgage payments, utilities and medical bills. Choosing another payment method can help you avoid unnecessary fees and expensive credit card debt.
1. Rent or Mortgage Payments
Many landlords accept credit cards for rent payments. However, you may have to pay a payment processing fee, often around 3% of the payment amount. These fees can quickly add up, especially because housing is a major expense for most households. And even if you earn rewards by using your credit card, you may wind up spending more in fees than you earn in rewards.
Better Ways to Pay
- Bank account payment (ACH transfer, electronic check)
- Cashier's check
- Money order
- Bill pay service
- Debit card, if there's no or a lower processing fee
Tip: Check with your landlord or property management company to confirm the rent payment options they offer. Some may not take money orders, for example.
2. Utilities
Some utility providers also charge processing fees if you pay your bill using a credit card. The fee is often only a few extra dollars, but it can add up over time if you regularly pay your utility bills by credit card.
Better Ways to Pay
- Bank account
- Debit card
- Check
- Cash, if accepted, at a bill payment location
3. Income Taxes
Income taxes can also be a major expense for some people, particularly if you earned income as a contractor or small business owner and didn't pay enough in estimated taxes throughout the year. If you do pay your taxes with a credit card, you'll pay a fee of 1.75% or 1.85% depending on the provider.
Getting a low-rate personal loan or starting a payment plan with the IRS might be a better option than paying the fee plus taking on high-rate credit card debt.
However, if you can afford to pay off the balance in full and won't accrue interest, paying with a card might net you some rewards. For example, some of the best cash back cards offer 2% cash back on every purchase—slightly higher than the credit card processing fees.
Better Ways to Pay
- Bank account
- Check
- Money order
Learn more: How to Set Up an IRS Payment Plan
4. Medical Bills
Medical bills can be difficult to plan for and surprisingly expensive. Paying medical bills with a credit card might seem like a convenient option, and there are medical credit cards specifically for covering these types of bills. However, unless your card has an intro 0% annual percentage rate (APR) offer, you could accrue a significant amount of interest while paying off the balance.
In addition to paying interest, the high balance could also increase your credit utilization ratio and hurt your credit score. If you struggle to make your bill payments on time, the credit card issuer can report the late payment to the credit bureaus once you're 30 days past due.
Leaving medical bills off your credit card can protect your credit score, since many types of medical bills don't affect your credit score. Unpaid bills that get sent to collections won't appear in your credit report for a full year—and medical collections for under $500 don't get added to your credit report at all. Older medical collection accounts will be removed once they're paid.
Better Ways to Pay
- Bank account
- Debit card
- Check
- Payment plan
- Financial assistance or charity care, if available
Tip: Before putting a large medical bill on a credit card, ask your provider whether you qualify for financial assistance or an interest-free payment plan. This can help you make the expense more manageable without taking on high-interest credit card debt.
5. Cash Withdrawals
You can use your credit card to get a cash advance at an ATM or at the checkout, using a convenience check, from a bank teller or sometimes through your card issuer's app. It can be a quick and easy way to get extra cash to cover bills. However, cash advances should generally be a last resort.
When you get a cash advance, you may need to pay an additional cash advance fee. Cash advances also often have a higher APR than purchases or balance transfers, and interest typically starts accruing immediately, even if you regularly pay your credit card bill in full.
Better Ways to Pay
- Debit card at an ATM
- Bank withdrawal
- Early direct deposit
- Borrowing from family or friends
Learn more: How to Get Emergency Money
6. Peer-to-Peer (P2P) Payments
Peer-to-peer payment apps like Venmo and PayPal can be convenient to cover bills, split expenses with friends or pay for services. But they can also be expensive if you pay through them using your credit card.
You may be charged around 3% of the transaction amount for some transfers made with a credit card. Your card issuer might also treat the transaction as a cash advance, which means you won't earn rewards and could be charged additional extra fees and interest associated with the cash advance.
Better Ways to Pay
- Bank account
- Debit card
- Existing app balance
Learn more: Is It Safe to Use Peer-to-Peer Payments?
7. Online Bets
Online sports betting and gambling have grown in popularity. Whether you can use your credit card may depend on where you live, the betting platform and your card issuer. But even when it's an option, using your credit card can be risky because you're potentially taking on high-interest debt. Additionally, your card issuer might treat these transactions as cash advances, which means a cash advance fee, a higher APR and no grace period on interest.
Better Ways to Pay
- Bank account
- Debit card
8. Tuition
Some colleges and universities accept credit cards for tuition, school fees and other higher education costs. But the added payment processing fees can make using a credit card an expensive way to pay, and you'll pay a lot more in interest than you would using other methods.
Better Ways to Pay
- Financial aid, including federal student loans or scholarships
- Bank account
- Check
- Debit card
- School payment plan
Learn more: Options if You Didn't Receive Enough Financial Aid
The Bottom Line
Before using your credit card, check whether you'll be charged a transaction fee or whether the transaction could be treated as a cash advance. Make sure you can comfortably pay off the balance to avoid getting into debt.
Using a credit card when it makes sense can allow you to earn rewards and enjoy credit card benefits. If you're looking for the right card, Experian's card comparison platform lets you compare credit cards matched to your credit profile and spending habits.