Generally speaking, it’s never a good idea to charge something that you’re unable to pay off in full since you’ll have to pay interest on the purchases. But there are some items that are definitely worth charging when you intend to make them without having to utilize the line of credit.
In addition to straight rewards, “there are some nice perks associated with using a credit card,” says Curtis Arnold, founder of CardRatings.com. “But all these perks never get utilized because people don’t know about them.”
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To help you maximize these perks and protections, MainStreet breaks down the scenarios when putting your purchase on plastic can prove worthwhile.
Many credit cards entitle cardholders to an extended warranty and price protection on items, such as electronics and appliances, that carry a warranty already.
Visa and MasterCard both offer complimentary extended warranty and purchase protection with many of their cards, and American Express provides coverage for all cardholders. Discover cards offer warranty protection as well, though only for a fee that varies based on the product and the card.
However, generally speaking, “most networks double the time of your warranty,” Arnold says. This can obviously save you money on repairs, should the item break after the original warranty expired, or the price of extending the warranty at the point of sale.
Some cards also additionally feature price protection, which means “if you see the product advertised at a lower price within a certain window of time, the issuer will refund the difference,” says Ben Woolsey, director of marketing and consumer research with CreditCards.com.
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A few credit cards carry certain secondary travel insurance coverage that can spare the added expense when you are planning a trip. This can include trip cancellation service, accidental death or dismemberment coverage as well as emergency assistance services, so check with your issuer to see what they may cover, Arnold says. Other cards, like the Chase Sapphire Preferred, entitle cardholders to concierge service while planning or taking their vacation.
Keep in mind that these perks are typically associated with travel rewards cards, which offer points back on airline and hotel accommodations as added incentive. The Discover Escape cardholders, who earn 2% back in miles on travel purchases, for instance, are eligible for up to $500,000 of Flight Accident Insurance.
Woolsey adds that “there are certain types of travel reservations you’ll need a credit card to even make.” For instance, many hotels require a credit card upon arrival to cover incidentals.
When it comes to making online purchases, “It’s just safer to use a credit card,” says Chris Mettler, founder of CompareCards.com. “There are more protections in place.”
You can find more specifics about these laws in MainStreet’s look into debit card fraud, but the basic rule of thumb is that debit card users are given a shorter amount of time to discover fraud if they hope to recoup any of the funds that were lost. They also can be held liable for the entire sum of money they claim was stolen if they fail to report the illegitimate activity within 60 days.
Woolsey agrees that it’s a good idea to use a credit card when purchasing goods on the Internet if you want “the credit card to serve as a firewall.” It’s also generally a good idea to use the credit card on products you are going to have shipped since many cards offer guaranteed returns on items that get lost, stolen or broken within a certain time frame.
Purchases From Service Providers
Along the same lines, Woolsey says it’s often a good idea to pay service providers, such as home contractors, hair dressers or landscaping companies, with a credit card (provided they accept them) since it offers certain protections if you’re ultimately dissatisfied with their work.
“With a credit card, it’s much easier to stop payment, withhold payment or work out a dispute with the merchant,” Nazari says.
Many credit card issuers have relationships with certain concert venues that entitle their cardholders to first dibs on tickets. Citi, for example, is currently running a presale on tickets to see Collective Soul in California and Jane’s Addiction in Texas.
Sometimes, credit card issuers will also offer the opportunity to get VIP access to an event. They also periodically offer discounts on the price of tickets, Arnold says.
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It’s not a bad idea to link monthly bills you are going to have to pay on a regular basis, such as a cellphone or a utility bill, to a credit card as opposed to a debit card.
“If I pay through my bank account, I get nothing for it,” says Adrian Nazari, CEO of Credit Sesame. However, if you pay with a credit card, you can earn rewards off the purchases. (Those who are fearful that this will lead them to lose track of their spending can pay the credit card off each day using a linked debit card account.)
What makes a cellphone bill an even better candidate for credit card payment is that some cards feature cellphone replacement to cardholders who pay their monthly bill with the card, Arnold says. The Citi Forward card, for example, features cellphone protection, which will cover up to $200 of the difference when the replacement charge associated with your cellphone insurance plan exceeds $50.
In addition to the better fraud protections, many credit cards exempt cardholders from paying foreign transactions fees on purchases, which can be as high as 3% of each transaction. Examples of cards that do this include Capital One’s Venture Rewards card, the Chase Sapphire Preferred, the PenFed Premium Travel Rewards American Express Card and the American Express Platinum Rewards Card.
However, “lots of times, even if you pay the fee, you can come out more ahead than if you converted your cash,” Arnold says.
Tax Deductible Items
It’s a good idea to charge items you plan on writing off on your taxes at the end of the year since the credit card bill itself can serve as a receipt of these charges.
“It’s great for record-keeping,” Nazari says. “You don’t have to worry about losing a little receipt. At the end of the month or even the end of the year, you can open up the account and scan for charges.”
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For instance, you might want to charge gas if you’re driving two hours to and from your office and are claiming it as a work expense or you can charge home repairs made to travel rentals, which, in certain cases, can also be written off on your taxes.
You might also want to use a credit card as a firewall on a recurring charge you have to automatically link to a piece of plastic, like a gym membership. This will also entitle you to certain protections if at any point in time you have to dispute the charges.
There’s also a chance that you could earn extra points or cash back from working out, as many issuers include gym memberships in higher cash-back categories, says Mettler.