5 things you should never put on your credit card

It’s argued that pineapple shouldn’t be put on pizza. But when it comes to credit cards, there’s no argument – some things should never be put on them.

When used correctly credit cards can be a great way to pay for everyday expenses, book a holiday, shop online securely and even save interest on your home loan. But when used incorrectly, you could end up paying extra interest and fees – no, thanks!

Wherever you stand with pineapple on pizza, here are five things you should avoid putting on your credit card:

1. Mortgage repayments

These monthly repayments should be made with cold hard cash that’s yours – not credit.

Making mortgage payments on your credit card will attract some serious fees and charges. Firstly, it’ll be processed as a cash advance, which means you’ll typically be charged a cash advance fee, miss out on your interest free days and pay a higher interest rate – plus your home loan interest.

Let’s say you use your credit card to make your monthly $1,300 loan repayment. Here’s how much extra it could cost you:

• Cash advance fee ($4 or 2% of the cash advance, whichever is greater) of $26.
• Daily interest of $0.78 (based on 21.99% p.a.) and if you don’t pay back the $1,300 within 30 days, you’ll be charged $23.50.

Each month, that’s an additional $49.50. And over a 30-year term, that’s approximately $17,820 extra in fees and charges – ouch.

2. Tax bill

Having to pay a tax bill is always a bummer, so why pay back more than you have to?

Putting your tax bill on your credit card will be treated as a cash advance. This means you’ll typically be charged a cash advance fee, a higher daily interest rate and you’ll also miss out on those interest-free days. Plus, the ATO charges a card payment fee which ranges from 0.70% to 1.45%.

If you can’t afford to pay your tax bill, it’s a good idea to contact the ATO and discuss setting up a payment plan instead of turning to plastic.

3. House deposit

When it comes to purchasing a house, most lenders will require a 20% deposit of the purchase price. And if you haven’t saved enough for the deposit, some people put the outstanding balance on plastic.

Despite the temptation and ‘ease’ of this strategy, using your credit card for a house deposit could land you in big financial trouble – you’ll be adding layers of additional fees, charges and interest as it’ll be treated as a cash advance.

Some lenders will also view your loan as high risk due to your credit card debt and will lower the amount they’ll lend you; while others will reject your home loan application altogether as they require at least 5% (or more) of the purchase price to be paid with actual savings.

4. Gambling

A cheeky office sweep is ok, or even putting a tenner on the Melbourne Cup, but gambling is never a smart idea.

Gambling transactions, whether they’re online or via an app, at the casino or at your local TAB, should never be put on your credit card – they’ll be charged as a cash advance. This means you won’t enjoy any interest-free days, be charged a cash advance fee and often a higher interest rate. And if your horse loses the race or your poker face failed, you’ll be down even more money.

Also be careful using your credit card for a parma and pot at your local TAB. They could be classed as a gambling purchase depending on how your TAB charges your card.

5. Cash out

Credit cards can be very handy. But it’s best to use them instore or inline instead of using them to withdraw fresh crispy fifties from an ATM unless you have no other option as it’s a cash advance – plus, you could be stung with an ATM usage fee.

So when can I?

Credit cards can be great if you spend within your means and pay your credit card balance in full by the due date or use it to spread out the cost of a larger purchase. It’s best to avoid using your credit card for things which will be classed as a cash advance as you might end up paying fees and interest straight away.

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