9 Things You Should Always Pay for with a Credit Card (and a Few You Should Never)
Credit cards can be a great tool when used wisely — and the benefits go beyond travel points. From using your cards strategically to build your credit to managing your purchases and payments responsibly, credit can help you establish your place in the financial world. Particularly if you plan on renting an apartment or buying a house, your credit is incredibly important. Landlords and mortgage companies alike will want to see that you’ve successfully built up credit and demonstrated that you can make responsible financial decisions.
When Should You Use a Credit Card?
Financial experts recommend using your credit card to build credit and take advantage of points and rewards for purchases such as the following:
- Appliances and electronics
- Business expenses
- Online purchases
- Rental cars
- Streaming service subscriptions
- Home repairs
- Purchases over the phone
They advise against using your credit card to pay for things like rent, gas, cash advances, medical bills, buying a car, and expensive events like weddings.
While it can be tempting to put everything on your debit card for budgeting purposes, there are financially savvy reasons to swipe your credit card. To set some parameters for when the best time is to pull out the plastic, I asked two personal finance experts to share their thoughts on when to always use a credit card and when to skip it.
Remember, though, that all good things are done in moderation. Using a credit card is only a smart financial move if you are able to pay the balance off either monthly or in a timely manner, before the interest begins to outweigh the benefit.
9 Things to Purchase with Credit Cards
Certain purchases can be to your advantage to put on your credit card. Here are nine of them.
Appliances and Electronics
You should always consider buying big-ticket items, like your refrigerator or your laptop, with your credit card — especially if you do want to finance any part of it. Caitlin M. Earle, CFEI (Certified Financial Education Instructor) of Your Budget BFF, explains, “Many companies will offer a very low interest rate — a lot of the time 0 percent — to use their credit card to buy appliances and electronics. The key is to pay it off within the specified timeframe, usually six months, to avoid additional charges.”
Additionally, most credit card companies will offer extended warranties on your product, which is great because the informal law of warranties states that most merchandise stays problem-free until the day the warranty ends. Also, some cards may offer price protection: If the store you bought your dishwasher from advertises it for a cheaper price within a certain time limit, the credit card company will refund the difference.
If you deduct business expenses from your taxes, keeping track of what you spend is necessary — and tracking expenses with a credit card can make business accounting a lot easier. Plus, smart use of a dedicated business card will help you improve your business credit. Many cards also provide cash-back rewards that can help with cash flow.
Earle adds that a credit card can be helpful for recurring expenses that often add up for a business. “Using a credit card for business expenses can also mean higher cash-back or even statement credits for things like internet, cell phone plans, and office supplies.”
“I would never use a debit card to pay for online purchases. In the event of a hack, your cash is at risk, so using a credit card for online purchases is always a good idea,” says Earle. Plus, shopping online with a credit card can provide you with multiple protections. If you receive the wrong item or just decide to return it, it’s a lot easier to do with your card. Your credit card is also a great protection against fraud. If you purchase something from a vendor site and never receive it, a lot of credit card companies will go ahead and refund you, then go after the merchandiser themselves.
Using your credit card to rent a car can save you money. Money-saving expert Andrea Woroch explains, “Many credit cards offer rental car insurance when you book with your card so you can decline coverage through the rental company.” This saves you considerable cash, without giving up the protection you need if there’s a fender bender on your vacay. She also points out that many cards will offer extra points on travel, including rental car bookings.
If you travel for business or pleasure locally or even overseas, use your credit card. It’s the easy way to book airline tickets, and some cards provide rewards points you can apply to future airline purchases. Earle recommends using cards strategically when you travel, particularly if you have a big trip on the horizon. “Signing up for a new credit card can mean big bonuses that can be used for free flights and hotels,” she says.
Many cards provide insurance however you choose to travel, so you could receive cancellation coverage or even a free hotel night and meal credit if your flight is delayed significantly. Most hotels require a credit card to check in, but you may receive perks that can include special concierge services and exclusive lounge areas when you use a preferred card. If you’re traveling overseas, some cards waive foreign transaction fees. Woroch also recommends looking at a card that offers a specific travel benefit: “Look for a card that will get you free checked bags on the associated airline,” she says.
Earle adds one fun perk that many don’t know about. “Some cards will also provide free or discounted tickets for events, concerts, or amusement parks — even Disney!”
If you are trying to build or rebuild your credit, and you need an easy recurring expense to put on your card, Earle recommends streaming services. “Streaming services are usually low-cost and can be easy to pay for each month, which means you will create a positive track record and not get in over your head,” explains Earle.
If you plan on paying your credit cards off every month, then paying for groceries with a credit card can be a no-brainer. “You can look for credit cards that offer higher cash-back percentages when paying for things like groceries. Two percent or even 5 percent can really add up!” says Earle.
Most contractors want to be paid in cash or by check. But if they accept it, use a credit card. Even if they charge you an extra fee, it may be worth it. If there’s a problem, like you’re not satisfied with the work or it hasn’t been completed, the card company could be your advocate. The card also makes it easier to stop or withhold payments.
Purchases Over the Phone
Love those home shopping channels or a sucker for infomercial products? If you like to purchase their goods over the phone, always use your credit card. Again, it will provide you with protection if you don’t receive the purchase, or if you get something that isn’t what was promised.
6 Things to Never Put on Credit
What shouldn’t you put on a credit card? Here are a few purchases that are better covered with an alternate payment form.
“If your landlord allows you to pay rent with a credit card, you’ll likely have to pay a processing fee of 1 to 3 percent of your total rent, which can add up fast,” says Woroch. Even if you’re receiving rewards, this adds up quickly, and you would be better off putting that extra money toward savings each month.
This one can be controversial because many credit cards offer higher cash-back percentages on gas, but Woroch says, “Paying for gas with a credit card will end up costing you more because gas stations charge an extra 10 cents per gallon. Pay with cash when possible.” It’s worth doing the math to see whether that 2 to 5 percent back is actually worth it.
The interest rates on cash advances are always higher than the rate for your purchases, and the interest accrues right away — there’s no grace period. Unless it is a true emergency and cash is the only option, skip getting a cash advance on your credit card.
It’s tempting to want to go all out for your wedding or your best friend’s 30th birthday bash by using your credit card, but don’t do it. Plan an event you can actually afford without going into debt. You want to look back at the event with fond memories, not at credit card bills for years to come.
Don’t attempt to cover expensive medical bills with a credit card. The high interest of the card will only compound your worries. Instead, go to the financial office of the medical facility and try to work out a payment plan. It will be cheaper and will cause less stress for you and your loved ones.
Purchasing a Car
Unless you believe you can afford the credit card payments that have substantially higher interest, why would you use your credit card to pay for a car? You can get better rates from the dealer or your personal financial institution. Even if you just want to use credit for the down payment, it’s a much better idea to shop around for a promotional 0 percent down deal.