Credit can be a great tool, if used wisely—and that means avoiding sticking yourself with debt that will take decades to pay off. Follow these guidelines for what to charge and you can make your credit cards work for you, not against you.
7 Things to Purchase With Credit Cards
Certain purchases can be to your advantage to put on your credit card. Here are seven of them:
1. Appliances and Electronics
You should always buy big ticket items, like your refrigerator or your laptop, with your credit card. 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.
2. Business Expenses
If you deduct business expenses from your taxes, keeping track of what you spend is necessary—and tracking expenses with a credit card can be invaluable and 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.
3. Home Repairs
Most contractors want to be paid in cash or by check. But if they will 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.
4. Online Purchases
Using a credit card when purchasing online can provide you with many 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.
5. Rental Car
Using your credit card to rent a car can save you money. Most cards already provide car rental insurance when rental fees are charged, so you don't have to pay extra for it through the rental company. You also won't have to jump through all the hoops you would if you pay with a debit card.
6. 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.
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. Many cards also provide insurance however you choose to travel, so even if you're purchasing train tickets, you'll receive cancellation protection and accidental death coverage. 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.
4 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:
1. Cash Advances
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.
2. Expensive Events
It's tempting to want to go all out for your wedding or your best friend's 50th 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 with nothing but regret.
3. Medical Bills
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.
4. 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 way smarter idea to shop around for a promotional 0% down deal.
Credit cards can enhance your life or make it more difficult. Follow the tips above so you'll be a satisfied — and savvy — credit consumer.