Inspired by a LearnVest reader’s question (thanks, SavvySaver!), we here at Credit Karma started wondering when, if ever, it is a good idea to use a credit card.
More often than not, we tell you the risks and dangers of credit card usage—credit mismanagement, jacked up fees, debt, and damaged credit score, just to name a few. But believe it or not, credit cards aren’t always terrible for you. In fact, for some situations, it’s a great idea to charge to your plastic.
Here are five recommendations for when you should use a credit card. (Take these situations with a grain of salt—all those credit card risks we usually talk about still loom behind every charge!)
1. To Protect Your Purchases & Save Money
Read the fine print of your credit card, and you’ll find that it can offer many consumer protections that are a good reason to choose paying credit instead of debit or cash. For example, major credit cards typically offer product purchase protection that replaces your purchase at no charge in the event of damage, product price protection that refunds the price difference if you find a better price on a product you already purchased, and an extended warranty protection with goes beyond the manufacturer’s warranty. American Express is known for its return protection, which reimburses your card up to 90 days after the purchase in case a store won’t accept your return.
2. To Protect Your Identity
Most credit cards also offer fraud protection, in which customer representatives will notify you of any suspicious spending activity to make sure your card or identity wasn’t stolen, and the issuer will reimburse any purchases incurred in the event of fraudulent charges.
3. To Make Your Travels Fun and Safe
Many credit cards, especially travel or rewards credit cards, offer all kinds of travel assistance that you’ll be glad to bring with you on vacations and business trips. Some typical perks include roadside assistance, lost luggage protection, and rental car insurance. Premium credit cards come with travel protections as comprehensive as ticket replacement if your baggage doesn’t arrive on time or your flight is late, your card reimburses you for clothing, hotel, or food purchases), hotel theft insurance, and even medical prescription replacement to cover the cost of new medication if you lose or forget it on a trip. Travel or rewards cards may come with a round-the-clock concierge service, literally at your beck and call.
4. To Cover You on Big Purchases
The beauty of a credit card is that it allows you buy a big-ticket item like a TV or refrigerator that you wouldn’t otherwise be able to pay for upfront, and pay it in affordable installments over a few months’ time. Since this opens the door to debt, have a set plan for how much you’ll pay monthly and how long it will take to pay it off in full. If you are able to get a new credit card right now, a 0% intro APR card will let you pay back your big purchase without paying interest.
5. To Earn Money While You Spend
If, and only if, you are the type of cardholder that pays your bill in full every month, then let your money work for you. Getting a rewards or cashback card lets you earn points, miles, or cold hard cash with every dollar you spend on your credit card. Just make sure you don’t cancel out your hard-earned rewards by paying interest charges on outstanding debt. If you can earn rewards and cash on your card without paying fees, you can beat issuers at their own game and pad your wallet/fund your vacation.
Keep in mind that every credit card varies in its policies, so go through the terms and conditions with a fine-toothed comb so you understand the card’s policies and exceptions.
Tell us in the comments: Why do you choose to use your credit cards?