3 things you shouldn't charge

The transactions are arranged through middlemen such as Official Payments and Link2Gov, which charge a 2.49% "convenience fee." That fee wipes out any benefit from most credit cards, which offer rewards typically worth 1% to 2% of the amount charged.

If you carry a balance, the math quickly gets worse. Interest rates on credit cards currently average around 11%, according to Bankrate.com, and rewards cards tend to have higher-than-average rates.

That might be OK if you can pay the balance off in a few months, but the toll builds the longer you put off payment.

Let's say you charged a $2,000 tax bill to a card with a 13% interest rate. If you paid only the monthly minimum (probably $40 at first and dropping over time), it would take you something like 20 years and cost nearly $2,000 in interest.

If you're likely to owe this debt for a while, you're probably better off making payment arrangements with the tax authority. The IRS currently charges taxpayers a 7% interest rate for payment plans that last up to five years. For more details, read "What if you can't pay the IRS?"

If you can pay off the bill in less than a year and don't want to mess with an IRS payment plan, a credit card payment isn't the worst solution -- if you handle the transaction carefully. Take the advice above about getting the best deal and making sure you arrange automatic payments to pay off the debt as quickly as possible.

Preventive maintenance: To avoid this situation in the future, get your withholding right. The IRS has a calculator on its Web site that can help. If you run your own business or otherwise have a complicated tax situation, hire a professional.

You can't meet your basic living expenses

Back when grocery stores started accepting credit cards (yes, Virginia, there was a time when they didn't), plenty of debt-averse types predicted instant doom. What's worse, they cried, than charging basic necessities?

Well, lots of things. Such as not eating. Or being unable to gas up your car to get to a job interview. Or having the electricity cut off.

The reality is that most American households don't have enough cash put away to get themselves through even a few months of unemployment. Some are spendthrifts, yes, but some have other, more important priorities that slow their ability to build up savings. So credit cards have become de facto emergency funds for many people.

If crunchtime has come and you're tempted to charge necessities, here's what you need to do:

• Cut your expenses to the bone before charging them. Don't make your financial problems worse than they need to be. Shut off the cable service, cook your meals, get a bus pass. Review every expense and cut until it hurts.

• Get your rates as low as possible. If you have good credit, your credit card interest rate should be below 10%, said Curtis Arnold, the author of "How You Can Profit from Credit Cards." You may be able to get your rates even lower by using balance-transfer offers or simply asking your issuer for a more "competitive" rate.

• Understand there may be credit fallout. As I noted in "8 secret scores that lenders keep," many credit card companies use a program that flags users if, say, they suddenly start charging more necessities and taking out cash advances. Such behavior can indicate a greater risk that you're on the rocks and about to default. The issuer may not do anything, or it may raise your rate, lower your limit or take other steps to reduce its exposure.

• Take advantage of available help. Read "Where to turn when you're desperate." If it comes down to choosing between charging groceries you can't afford and using food stamps, I'd use the stamps.

Preventive maintenance: Emergency fund, emergency fund, emergency fund. Sensing a theme here? Even though it may take you a while to build one while you work on other priorities -- saving for retirement, paying off debt -- you still should pile up a cache equal to three months' expenses, and preferably six months' worth, as soon as you can. (Start small: See "Why you need $500 in the bank.")

Liz Pulliam Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "Your Credit Score: Your Money & What's at Stake." Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

Updated March 19, 2009

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