Home Featured The 5 ways your credit card is ruining your finances

The 5 ways your credit card is ruining your finances

0
The 5 ways your credit card is ruining your finances




<p>Besides all the convenience they provide, credit cards can still lead to some dire financial situations if you're not careful. Some spending can result in racked-up interest on missed or spread-out payments or <a rel="noopener noreferrer" href=" target="_blank">damaging your credit score</a> in the long run. But even on a purchase-to-purchase basis, choosing to swipe or tap could create some more immediate money issues you'd probably want to avoid.</p>
<p>"There's a saying that credit cards are like power tools: They can be really useful, or they can be dangerous. It all depends on how you use them," says <strong>Ted Rossman</strong>, <a rel="noopener noreferrer external nofollow" href=" target="_blank">senior industry analyst</a> at Bankrate.</p>
<p>What can you do to improve your finances? Here are some ways that your credit card could be ruining your finances.</p>
<p><strong>READ THIS NEXT: <a rel="noopener noreferrer" href=" target="_blank">Never Use Autopay for These 6 Bills, According to Financial Experts</a>.</strong></p>
<div class="number-head-mod number-head-mod-standalone">
<h2 class="header-mod">
<div
class="number">1</div>
<div class="title">When you're paying more due to merchant fees.</div>
</h2>
</div>

<p><img decoding="async" class="alignnone size-large wp-image-417178" src=" alt="" width="1000" height="667" /></p>
<p>It can be very convenient to be able to swipe, tap or pay. When a merchant accepts a credit card as payment for the goods and services that they sell, he or she incurs credit card processing fees. And while many merchants accept this as a cost of doing business, many instead choose to pass these costs along directly to you through a surcharge on your total payment, says <strong>Riley Adams</strong>, <a rel="noopener noreferrer external nofollow" href=" target="_blank">founder and CEO</a> of WealthUp.com.</p>
<p>"For example, if you make a $1,000 purchase with a credit card at a business that imposes a 4 percent surcharge, you'll end up paying an additional $40," he says. "Sticking you with that surcharge keeps their profit margins whole and you worse off. If you can, pay in another way."</p>
<p><strong>RELATED: <a rel="noopener noreferrer" href=" target="_blank">Never Use Your Debit Card for These 6 Purchases, According to Financial Experts</a>.</strong></p>
<div class="number-head-mod number-head-mod-standalone">
<h2 class="header-mod">
<div
class="number">2</div>
<div class="title">When you're using the wrong rewards card or paying too much in annual fees.</div>
</h2>
</div>

<p><img decoding="async" class="alignnone size-large wp-image-442350" src=" alt="A closeup of a person holding three credit cards in their hand while pulling out one" width="1024" height="683" /></p>
<p>Credit cards do have the benefit of earning back rewards, even if you're just using them on essential purchases and monthly bills. However, experts warn you might be missing out on them if you're not signed up for the right ones.</p>
<p>"While using a cash back card is great, you want to make sure it works harder for you by rewarding you for the types of purchases you make the most or stores you shop at the most," says consumer savings and <a rel="noopener noreferrer external nofollow" href=" target="_blank">smart shopping expert</a> <strong>Andrea Woroch</strong>. "So look at your spending over the last several months to determine where you spend the most and find a cash back card that gives you more back in that spending category."</p>
<p>Rossman says that the annual fee is also included in this. "Annual fees could be worth it, depending on how you use the card—including valuable perks such as airport lounge access, free hotel stays, better rewards, and credits for rideshares, food delivery, and retail memberships. But paying an annual fee for a card would be a mistake when you're not taking advantage of enough of the perks to justify it."</p>
<p><strong>READ THIS NEXT: <a rel="noopener noreferrer" href=" target="_blank">Always Use Cash for These 5 Purchases, Financial Experts Say</a>.</strong></p>
<div class="number-head-mod number-head-mod-standalone">
<h2 class="header-mod">
<div
class="number">3</div>
<div class="title">When someone else uses it recklessly.</div>
</h2>
</div>

<p><img decoding="async" class="alignnone size-large wp-image-404072" src=" alt="Using a credit card for online shopping" width="1024" height="683" /></p>
<p>Staying on top of how much you're swiping can be difficult, but it's even more challenging when you're sharing your account with someone who spends a little more haphazardly. In many cases, you may need to cut off others before things get too out of control.</p>
<p>"Allowing a cosigner or authorized user who is not financially responsible to use your card and charge more than you can afford to pay can become ruinous," says <strong>Bill Hardekopf</strong>, a financial literacy expert and author of <a rel="nofollow noopener noreferrer external" href=" target="_blank"><em>The Complete Credit Card Guidebook</em></a>. "Since it is your account, you will be held responsible for their charges."</p>
<div class="number-head-mod number-head-mod-standalone">
<h2 class="header-mod">
<div
class="number">4</div>
<div class="title">When you use it to pay your taxes.</div>
</h2>
</div>

<p><img decoding="async" class="alignnone size-large wp-image-452836" src=" alt="A closeup of someone filing taxes on their laptop with a calculator and a pile of cash" width="1000" height="667" /></p>
<p>Calculating your IRS debt accurately can be a difficult task. You might not want to use your plastic when you settle your debt.</p>
<p>"When confronted with a substantial liability such as taxes, the temptation to put it on a credit card may arise," says <strong>William Bevins</strong>, a private wealth manager at <a rel="noopener noreferrer external nofollow" href=" target="_blank">Cypress Capital</a>. "Remember that the processor usually applies an additional fee of approximately 2 to 2.75 percent on your scheduled payment. You can set up a payment schedule with the IRS that comes with a better interest rate."</p>
<p><strong>For more financial advice delivered straight to your inbox, <a rel="noopener noreferrer" href=" target="_blank">sign up for our daily newsletter</a>.</strong></p>
<div class="number-head-mod number-head-mod-standalone">
<h2 class="header-mod">
<div
class="number">5</div>
<div class="title">When you use it to fill up at the pump.</div>
</h2>
</div>

<p><img decoding="async" class="alignnone size-large wp-image-441253" src=" alt="A person paying for gas at the pump using a credit card" width="1024" height="680" /></p>
<p>A trip to the pump may seem costlier than ever lately, but that doesn't mean there aren't ways you can save a little money off the bat. According to experts, avoiding a swipe of a tap is one way you can save.</p>
<p>"Don't let the gas price signs fool you: If you are paying by credit card, you will have to dish out an extra 10 cents per gallon in many cases," warns Woroch. "Consider paying with cash when possible or using an app to find a cheaper gas station to offset this added fee."</p>
<p>Want to make some savings, but don’t want to keep going to the ATM every time you need to? Consider looking into a credit card that can actually <a rel="noopener noreferrer" href=" target="_blank">save you money on gas purchases</a>.</p>
<p><em>Best Life is a source of the most recent financial advice from the top experts, as well as the latest research and news. But our content should not be used to replace professional guidance. When it comes to the money you're spending, saving, or investing, always consult your financial advisor directly.</em></p>

The post Your credit card is ruining your finances appeared first on Best Life.



Continue reading…