by Elizabeth Aldrich | March 25, 2019
Wise credit card usage requires discipline and planning, and slipping up can lead to fees, hits to your credit score, and unmanageable debt. However, paying with a credit card can also have huge advantages if done correctly.
From rewards programs to often overlooked protections, your credit card may be the smartest and safest way to manage your money. Here are five reasons to consider making your next purchase with your credit card.
Your credit card can act as a safety net if your card or financial information is stolen. With a debit card, the thief has access to any money associated with your account. They can drain your bank account before you even realize that your card is missing. With a credit card, a thief won’t have access to any of your personal accounts. Any fraudulent purchases they make will be with the credit card company’s money, and your funds will be safe.
Credit card companies are required by law to limit your liability for fraudulent purchases to $50, and the best credit cards offer zero liability policies that won’t charge you at all. Debit cards aren’t subject to this limit and can charge you up to $500. When you’re dealing with the stress and hassle of resolving fraudulent purchases, the last thing you want to worry about is having to come up with additional funds out of your own pocket.
Many credit cards offer additional protections that can save you money and stress when faced with unplanned circumstances. For instance, if you use your credit card to rent a car, you may have access to rental car insurance coverage to help cover the cost of damages if you’re in an accident.
Your credit card may offer benefits that are often overlooked, like trip cancellation and delayed baggage protection. Trip cancellation protection can help you recoup non-refundable, prepaid expenses for travel if you have to cancel due to uncontrollable situations. Some travel rewards credit cards offer delayed baggage protection to cover the costs of having to purchase essentials while you wait to be reunited with your belongings.
You may be able to take advantage of some form of purchase protection if an item is damaged or stolen soon after purchase with your credit card. Even better, by paying your monthly cell phone bill with your credit card, you may have additional coverage if your phone is damaged or stolen. Check with your credit card company to determine which protections might apply to you.
Making purchases with the best rewards credit cards can help you double dip with each dollar you spend. Many credit cards offer rewards programs that earn you perks in the form of travel points, airline miles, and cash back on everyday purchases. This is a great use of your money as you will literally get more bang for your buck.
Let’s say you spend $3,000 per month on a flat-rate cash-back credit card that offers 1.5% back on all purchases. You’ll earn a whopping $540 per year in cash back just for using your credit card. Some credit cards even offer 2% back on all purchases during the first year, which would net you $720. That extra money could cover the cost of your holiday shopping or be put toward your next vacation.
The worst thing you can do for your credit score is miss a credit card payment. Once your delinquent account has been reported to the credit bureaus, it can stay on your report for seven years. On the other hand, one of the best things you can do for your credit score is to use your credit card regularly and pay it off in full each month. This is a great way to build and maintain excellent credit. It takes discipline but will pay off as your credit score continues to climb.
There are a number of purchases that should be made on a credit card, particularly travel expenses. Not only do the best travel credit cards offer travel insurance, but some reservations require a credit card, particularly hotels and rental car companies. Even when it’s not required, using a debit card usually means they’ll put a big hold, sometimes hundreds of dollars, on the funds in your checking account. This can cause you financial problems if you were planning on having access to that money for other purchases or bills.
As long as you commit to paying your credit card bill on time and avoid overspending, you can safely use your credit card to your advantage.
As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.
But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases into 2022, has some of the most generous cash back rewards we’ve ever seen (up to 5%!), and somehow still sports a $0 annual fee.
That’s why our expert – who has reviewed hundreds of cards – signed up for this one personally. Click here to get free access to our expert’s top pick.
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