WTOL.com, Toledo's News Leader, News 11 | What you're charging may determine your interest rate

What you're charging may determine your interest rate

Report by Lauren Lowrey - email | bio

Posted by LS

You've probably heard this before: "If you can't afford it today, it'll just be worse tomorrow." Still, so many Americans use their credit cards to make purchases they can't afford.

Some of those charges send a warning light to lenders. 

Swipe, swipe, swipe... It's easy to spend, but so hard to pay off. We've become a plastic society that does everything on credit, but some things you just can't afford to charge.

Here's a list of the Top 5 Things You Should Never Charge:

5. Basic Living Expenses

It may seem smart to swipe if you don't have cash for food or gas, but it can really hurt your credit. Credit card companies have begun using computer programs that flag users if they suddenly start charging necessities.

"They'll use that as an excuse to raise your interest rate, which makes a payment higher and makes it harder to get out of debt," says Michael King with Consumer Credit Counseling of Northwest Ohio.

He says it goes down-hill the minute you use credit to substitute your income. "They go to the grocery store and they use their credit card and they don't pay it all off," says King, "They go to the gas pump and they use they're credit card and they don't pay it all off." He adds, "It will always end in disaster if they're using credit for a source of income."

It really starts to spiral when you use your credit card to get cash.

4. Cash Advances

Cash advances carry a much higher interest rate because they represent an unknown to your creditor, which means they can't track where you spend the money.

King tells us, "If you've already been charging food and gas and not paying it all off at the end of the month, when you start to take cash advances that's a bad sign that you're going to be over-extended."

3. Taxes

Avoid paying your taxes with a credit card.

It's better to contact the IRS and set up a payment plan than to charge your taxes. The 18% interest you'll pay to the credit card company is much more than the 7% interest the IRS requires.

2. Your Mortgage

"Well, mortgage and car loans are pretty much the most important things you can pay," says King. Just by charging those monthly expenses, your creditor will think you're on the rocks.

That leads to the number one item you should never charge.

1. Car Loans

Because it is one of the most important bills you pay, it would be another reason to raise your interest rate making it near impossible to pay off the bill.

That starts you down a dangerous financial path.

"You may end up in bankruptcy court, and nobody wants to end up there."

Help Yourself

"If you can't seem to curb your spending, here's a helpful tip: Freeze your credit card. Then, if you really need to use it, you should have no problem waiting the day (or so) it will take to thaw.

In the meantime, call consumer credit counseling if you need help getting things in order.