Some purchases are ideal to make on credit cards because your credit card company will pay you back if things go wrong. However, you have to read your card's Guide to Benefits to know what benefits exist.

Other purchases should never be made on credit because of security risk or extra fees. Learn about the best and worst purchases to make with plastic and what to prioritize when choosing a card. 

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The Fine Print: It's Worth the Read

Most credit cards offer benefits and insurance that many cardholders don't know exists. According to a recent survey from creditcards.com, one in four people are unaware of the benefits their cards offer. The perks and coverage vary from card to card, and cards with annual fees may offer more generous protections. However, even no-annual-fee cards offer a surprising number of benefits, including price protection, extended warranty, and trip insurance.

The Guide to Benefits brochure that came with your card explains the benefits offered by your card company. If you tossed this guide, you can find it online by signing into your credit card account and looking under account services. The guide outlines the benefits, describes the restrictions and exclusions, and provides instructions on filing a claim.

The Best Purchases to Make With Your Credit Card

Because of various benefits offered by credit card companies, some purchases are ideal to make by credit card. Of course, you should always use credit cards responsibly and make these major purchases only if you pay off the balance each month. Below are four great purchases to make with credit cards and a description of protections your card may provide for these types of purchases.

1. Electronics and Appliances

Your credit card may offer several benefits when you purchase electronics or appliances. Some cards offer price protection and will refund the difference if you find the product advertised for less within a certain time frame, usually 90-120 days. Keeping an eye on circulars or checking online for a better price following a major purchase can net you some easy cash.

Your card may also provide an extended warranty for 12-24 months beyond the expiration of the manufacturer's warranty, which is great in case your microwave goes on the fritz the month after the original warranty expires.

Many cards also provide return protection and will refund your purchase price if you decide you don't want an item and the store's return window has passed. You'll have to mail the item to your card provider, but you can get your money back.

2. Cell Phones 

Some credit cards offer cellphone insurance and will pay to replace a damaged or stolen phone. Review the Guide to Benefits carefully, as it's likely you must use the credit card to purchase the phone and pay the monthly bill using your credit card to be eligible for the benefit. There may also be a deductible to pay, but it may still be cheaper than replacing an expensive phone.

3. Car Rentals

Your credit card may offer collision insurance and pay what your primary insurer won't if you're involved in a wreck, so you can pass on the coverage offered by the car rental company.

Another common benefit is emergency roadside assistance. Exclusions often apply on type and use of vehicle, so check the Guide to Benefits to be sure car you rent is covered.

4. Travel

Credit cards offer a number of protections related to travel. Some cards offer trip cancellation and interruption insurance and will reimburse you up to a set amount if a trip must be canceled or interrupted due to certain unavoidable circumstances.

If you're traveling abroad, credit cards may provide a monetary exchange that is cheaper than what you can receive exchanging cash locally. Concierge services provide advice or information about your local destination, recommend local physicians in case of emergency, or provide translation services.

Certain credit cards with travel rewards may also offer access to lounges, free luggage checks, and discounts on in-flight services.

Baggage delay protection will reimburse you for expenses you incur if you must purchase certain items when your luggage is lost or delayed. Your card may also offer theft protection if items are stolen from your hotel room.

Travel accident insurance will provide payment if an accident during travel causes loss of life, limb, hearing, or sight. Hopefully you'll never need to utilize this insurance, but the benefit does exist.

The Worst Purchases to Make With Your Credit Card

Some purchases should never be made by credit card. These four types of purchases can be costly to you or your security. Avoid these types of credit purchases.

1. Cash Advances

A cash advance may be the worst purchase you can make on your credit card. Initially, you will incur a fee, usually 2-5% of the amount of the advance. This means if you get a $300 cash advance, you could pay a $15 fee in addition to ATM fees.

Next, you will have to pay interest immediately on the amount advanced; there is no grace period like on regular credit card purchases. The interest rate on cash advances is also higher than on regular purchases.

Between the initial fee and the interest charges, a cash advance on a credit card is an extremely expenses way to get cash. If you need to get cash quickly, try to get a personal loan from a bank or borrow from a friend or relative.

2. Purchases where your credit card is out of your control

Would you hand your credit card to a stranger and let him walk off with it? That's what many people do in restaurants when they hand their card to a server to pay the bill.

Yes, most servers are honest employees and use your card to charge only your purchase. However, it does occasionally happen that an unscrupulous server copies your number or runs it through a skimmer, and then you become a fraud victim. Why take the chance? Use cash rather than allow your card to be out of your control.

3. Unsecured purchases online

When shopping online, make purchases only on secure sites. Make sure the URL begins with "https" and look for the closed lock on the browser, or your credit card information could be at risk. According to a Pew Research survey, 18% of online adults reported having important information stolen, like credit card numbers or personal data.  

If you're making a purchase from an unfamiliar vendor, do some homework and make sure the vendor is reputable and doesn't have complaints against them.

While your credit card offers protection against fraud and will reimburse you for fraudulent purchases if you notify your company in a timely manner, it's a hassle to cancel your card and have it reissued.

4. Purchases that cannot be paid off within a billing cycle

Credit cards should not be used to purchase things you can't afford. It doesn't matter what a good deal you got on a purchase. If you must pay off the purchase over multiple billing cycles, the interest you pay will cost more than you saved on the purchase.

Choose your credit card wisely

Credit cards advertise great cashback perks or rewards programs, but you should examine all terms and conditions when choosing a card.  A creditcard.com survey reported that 24% of credit card holders signed up for their most-used card because of rewards and cash back. These incentives were prioritized over other important considerations such as a low interest rate (18%) and low fees (5%). .  

If you always pay your balance in full, prioritizing card rewards is fine. However, choose a card with a low interest rate if you ever carry a balance. Finally, always take time to read the Guide to Benefits so you can get the most out of what's in your wallet.

 

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