Here’s What Happens When You Only Use Credit Cards

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Using credit cards for all of your purchases could help you score cash back, but it could also backfire on you. Read on to learn more. 

Credit cards can be a convenient way to pay for purchases. If you have a credit card in your wallet, you don’t have to worry about running to the ATM to take out cash to buy the things you need. And the more purchases you put on your credit cards, the more opportunities you have to be rewarded in the form of cash back. When you hand a dollar to a cashier, they’re not going to hand over a few pennies as a thank you.

But only using credit cards and never paying for purchases in cash may not work out so well for you. Here’s why.

You could face your share of fees

You might be able to get away with paying the bulk of your bills with a credit card without it costing you more money. But there are certain expenses where you’re likely to face a surcharge if you attempt to pay by credit card.

First, over the past few years, more and more restaurants and small businesses have taken to imposing fees for swiping a credit card. Since these businesses are charged processing fees, they pass that cost onto their customers so they don’t have to absorb it themselves.

Secondly, if you pay a mortgage, you generally won’t get the option to use a credit card. However, some mortgage loan servicers will allow you to use a third-party system to make your payments. In that situation, though, you’re almost guaranteed to be charged a fee or surcharge for that convenience.

Some businesses won’t even take credit cards

You may be the sort of person who, as a general rule, never carries cash. But one thing you should know is that some businesses simply do not accept credit cards — and they don’t even have the equipment to process transactions on them.

Also, some businesses — notably, smaller ones — impose a minimum purchase requirement to be able to swipe a credit card. So let’s say you want to make a $7 purchase and there’s a credit card minimum of $10. You might end up spending an extra $3 needlessly to be able to use your card.

Only borrowing via credit cards might hurt your credit score

Your credit mix, which speaks to the different types of credit accounts you have, represents 10% of your credit score. If your only form of borrowing is credit cards and you don’t have any installment loans (like auto loans) or have never had any in the past, that could reflect negatively on you — and result in a lower credit score. And that could impede your ability to qualify for the credit cards you want with the best rewards programs.

There’s nothing wrong with primarily using credit cards to pay for your various expenses. But you may want to make a point to carry some cash, just in case. And you should recognize the impact it might have on your credit score if you’ve never borrowed money other than in credit card form.

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