When not to use your credit card

RALEIGH (WTVD) -- Paying with debit, credit, or cash? Each method has their advantages and pitfalls. While credit cards are attractive, especially if you're earning points towards free stuff or cash back, you need to watch for those cards with high interest rates.

"Keep in mind the economics of the credit card the merchant pays the credit card company," said Scott Gamm, Economics Reporter for TheStreet.com. "They're making money every time you swipe that card."

First, Gamm suggests that you do not charge payments due on either student loans or tuition.

"The point here is, why trade low interest debt for high interest debt?" Gamm said.

Most credit cards charge between 15-20% interest, while working out a plan with the bursar's office may be 0%. And remember, student loans may often have deferment life lines in case you can't pay right away.

"Not all student loans are created equal. Keep in mind some require you to pay immediately some not until you graduate," Gamm added.

Gamm also suggests avoid charging large medical or hospital bills on high interest cards.

"When you have medical bills, contact the hospital first and say here's why I can't pay now." He said. "Is there any way to restructure the debt what kind of payment plan can you put me on?"

Doctor's offices are also willing to settle debt for little or no interest. But if you get on a payment plan, don't charge the payments unless you will pay them off monthly.

When it comes to taxes, don't charge those dollars to Uncle Sam unless you plan on paying the charge off immediately.

"They might be charging a 2% fee on top of that," Gamm said. "And we all know how much IRS bills are for taxes and that could add up significantly."

The same goes for high fees attached to charging your mortgages via a third-party lender. When it comes to charging a new or used car? If you find a dealer willing to let you do it, fees can add thousands onto that vehicle and max out your credit quick.

Here's when it does pay to use your credit card. If you're offered a warranty on large ticket items like appliances, it might be worth it as it gives you peace of mind. Also, if you're shopping online, you have plenty of credit card protections when it comes to potential fraud. You're much more likely to get your money back in a dispute if you used credit.

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