It's a simple fact that in order to establish credit, you have to use credit. For that reason alone, it's a good idea to use credit from time to time. Beyond that, there are also certain types of purchases that you should always use credit cards for because of the increased security that cards offer. Many credit cards also offer additional perks like points earned on purchases, which can really add up over time, essentially equating to "free money" for those who are consistently able to pay off their card balances, never having to pay costly interest fees.
Electronics and Appliances
Not only is it a great idea to purchase big-ticket electronic items on your credit card because you can rake in the points, but many credit cards also provide some kind of insurance on these items when purchased using a card. The most common of these insurances come in the form of an extended warranty, often doubling the length of time the manufacturer provides. Some cards may also offer price protection that will cover the difference if the price of an item decreases within a specific period of time after the purchase is made. Similar to electronics purchases, you'll want to use your credit cards to purchase home appliances. Cardholders can enjoy some additional security and insurance on their purchases, such as the ability to double up on the warranty period, or occasionally price protection.
Although it may not relate to insurance or security, many credit card companies have partnerships with event promoters or venues. These partnerships provide customers with access to purchase tickets to big events in advance of the general public, discounts or perhaps even the opportunity to go to exclusive events that are only offered to cardholders.
Many credit card issuers will offer their customers assistance with travel. This often comes in the form of cancellation or trip interruption coverage—which many people end up booking separately through an insurance company because they don't even know they've got coverage through their credit card if a booking is made with that card. Some cards may even offer coverage for lost luggage or even some emergency medical coverage to their clients. Booking with a travel-themed credit card allows cardholders to double up on the benefits as these cards tend to offer an even higher rate of points awarded on travel-related purchases. These benefits are certainly pretty good considering that you'll generally require a credit card to secure any bookings you make for travel.
Many credit cards offer some level of insurance to cardholders that book using the card. This coverage is typically not as thorough as it is if you purchase insurance through the rental company, but it usually does cover some collision coverage, though not typically insurance for liability or injury.
Many people face difficulties when trying to use debit cards overseas. Since credit cards are typically more widely accepted than debit cards, you may find that it's easier to use a credit card overseas than to use a debit card, or perhaps even cash! It is generally also safer to carry around a credit card as opposed to lugging around large sums of cash since it's easier to cancel a credit card if it gets lost or stolen than to recover lost cash. Some credit card companies will also offer a more favorable exchange rate than a currency exchange office, so this can also provide clients with some cost savings. Just remember to contact your card provider before you leave home to advise the company on your travel itinerary and to discuss any card security concerns.
Credit card transactions are typically more easily traced online than if you use debit, money orders or checks. These cards often provide a certain amount of coverage for fraudulent purchases, which can really help cardholders if their credit card information happens to fall into the wrong hands. Though many debit cards will offer some similar coverage, the length of time given to report these fraudulent charges is typically shorter. Some cards may even offer protection in case the article you purchase online is lost or damaged in transit. Always keep in mind when buying online you should never send card information over email or text message. You should also avoid any websites that don't use a secure payment site. You'll know the site is secure when you see a lock icon on the browser, or the website address begins with "https" instead of just "http."
Do you live in fear of losing your cellphone? If you consistently pay your cellphone bills using your credit card, your card provider may actually offer you some coverage in case your phone is lost, damaged or stolen. This coverage typically requires that your phone bills are up-to-date, and beware that there are typically a large number of restrictions in this insurance coverage. For example, you may not be able to make a claim if your cellphone gets swept away in a flood or if you miss a cellphone payment. Also, anyone who uses this coverage is also typically required to pay a deductible.
The Bottom Line
Even though there are many times that your card may offer perks, there are also plenty of times you should not use a credit card to make purchases. First and foremost, don't use credit cards when you don't have the cash to cover your purchase. You should also avoid making purchases anywhere that you're concerned about the safety or security of your card. This includes any times where the card will be out of your sight. This is common at many gas stations or restaurants where the server or attendant takes your card to a different location to process the payment.
Think of credit cards as a convenience, not a necessity. It's nice to collect points on your credit card, but not if you're paying huge amounts to the card issuer in the form of interest. For this same reason, you should not use your card for cash advances. You often end up paying a higher rate of interest, and you start paying interest as soon as you make the withdrawal, unlike on conventional card purchases where you are given a grace period. As with all things financial, be sure to read the fine print and know exactly what you're getting involved in before taking the plunge. There may be lots of perks offered by the card issuer, but keep in mind that the money to cover those perks is coming from somewhere—and that's typically from the wallets of unwitting consumers who have failed to pay on time.