A credit card used responsibly can be a great tool to build your credit score and a credit history.
If you pay off your bill in full every month and balance your budget like a pro, using a credit card for most expenses allows you to track your spending easily and take full advantage of cash-back and other rewards programs.
But if you don’t pay off the bill each month, the high interest rates on a card will cost you as your debt keeps rolling over. That’s when you should consider cheaper methods of financing.
Here are five times you may want to ditch the credit card.
1. To pay for a big expense
You may be moving to a new city, remodeling your kitchen or paying for your dream vacation.
If you don’t have the money to pay your entire bill, any unpaid balance racks up heavy interest. Using more than a third of your available credit can have a negative effect on your credit scores, too.
Obviously, saving the money you need ahead of time, paycheck by paycheck, is optimal.
If that’s not possible, a personal loan may be a cheaper option than charging your card. A personal loan typically is an unsecured loan, which means you don’t pledge any collateral and you get the loan at a fixed interest rate determined by your creditworthiness. The rate on a personal loan is often lower than the average rate on a credit card, which is typically above 15%. Since the loan payments are fixed and generally paid back over two to five years, it may be easier to work a personal loan into your monthly budget.
Some major banks offer personal loans, as well as most credit unions and online lenders.
2. To consolidate credit card debt
The average American household carries $130,922 in debt, with $15,762 of it on credit cards, according a 2015 NerdWallet study.
If you are trying to consolidate all your consumer debts into one simple payment, the best option depends on your credit scores, how much debt you have and, most importantly, your ability to pay down your obligations.
Those with excellent credit may qualify for balance transfer cards, which offer introductory annual percentage rates of 0% for a certain period and typically charge a balance transfer fee. If you can pay the balance before the 0% rate expires, it’s your cheapest option.
But if your credit is average, you can tap your home equity or take a loan against your retirement account or life insurance policy, among other options. Use caution, however: The consequences for defaulting when you borrow against your home or retirement account are severe. An unsecured personal loan may be more expensive but less risky.
Those with bad credit should resist consolidating debt to stay afloat; you may just be delaying the inevitable. Most experts say debt management plans or even bankruptcy are better options, despite the pain involved, if you can’t reasonably pay off your consumer debts in five years.
3. To fund emergencies
A credit card shouldn’t be your first option in an emergency situation, especially if you don’t have the money to pay your bill in full later on.
Today is the best day to start building your emergency fund, so you don’t have to use your credit card for that busted car part or trip to the emergency room. You don’t need much to make a difference. A recent study by the Urban Institute, a Washington, D.C.-based think tank, showed that as little as $250 was usually enough to keep a family from facing eviction, missing a utility payment or receiving public benefits.
4. To pay for your wedding
Many couples use credit cards to help finance a wedding, but that brings with it the temptation to overshoot the wedding budget.
It’s not a great idea to start your married life in debt, but in some instances, a wedding loan for a portion of the expenses could help you stick to your budget. Loans come with fixed interest rates, which can help you easily factor your monthly payments into your budget.
Saving for the event or keeping it simple are even better ways to have a wedding within your means.
5. To pay your taxes
You can pay your taxes by credit or debit card, but the vendors that the IRS authorizes to accept card payments charge a convenience fee of 1.87% to 2.25% of the amount you owe. E-filing software companies charge even higher rates for card payments.
It’s better to tap into your savings or make use of the IRSinstallment plan option to avoid paying a fee on top of your tax bill. If you have excellent credit, you may qualify for a balance-transfer credit card to make your payment, but make sure you can pay off your bill before the 0% APR period ends.
Amrita Jayakumar is a staff writer at NerdWallet, a personal finance website. Email: email@example.com. Twitter: @ajbombay.