Master Debt


The credit card debate rages on – to use or not to use – but few people will deny that using a credit card responsibly is probably the easiest way to build a solid credit history. And everyone could use a good credit history.

Another bonus to responsibly using a credit card: rewards and cash back. Hey, why not make a little profit while spending what you would anyway?

Even if cash back and rewards aren’t your priority, there are still occasions in which it’s wiser to use a credit card than cash. In some cases, other methods of payment aren’t readily accepted, plus oftentimes credit cards offer you better protection.

So when should you use a credit card rather than cash?

1. Protecting Your Purchases

Let’s say you are about to buy a big-ticket item like a TV, washing machine, or any other pricey gadget or appliance. True, buying with cash will get you a receipt and a one-year limited manufacturer warranty in most cases. However, this is where your protection ends. As a rule, the manufacturer warranty won’t cover any appliance even one day after your warranty expires. And anyone familiar with Murphy’s Law knows how often these things happen.

Or, let’s say you’ve played with your new purchase for a month and a half, and realize it’s not for you. Can you bring it back to the store? As a rule, no. Rarely do you have more than 30 days to return your item and, depending on local laws, some retailers may not allow any returns. If only there was a way to turn back time, even just a little!

Well, the solution may already be in your wallet. Some of the most underutilized benefits of a credit card are the protection features listed below.* Keep in mind that not all credit cards feature every benefit listed below, and there are always limitations, so read your credit card’s terms and conditions, and ask questions if something’s not clear.

  • Extended Warranty gives exactly what it says. This benefit will usually extent the manufacturer’s warranty for one additional year, so if your item comes with a one-year manufacturer’s warranty, you may get covered for up to two years.
  • Price Protection covers the difference if your item has gone down in price within 60-120 days from the date of purchase, covering both brick-and-mortar and online shopping.
  • Satisfaction Guarantee will refund your purchase if the store refuses to take it back, usually within 60-90 days from the time of purchase.
  • Purchase Assurance covers your purchased item in case it gets lost or stolen, usually within 90-120 days from the time of purchase.

2. Paying Service Providers

If your home contractor accepts credit cards – and nearly two-thirds do – you might want to use it to pay for their services. According to Business Insider, “you’re far better protected against contractor fraud or botched projects by a credit card company–especially if your card comes with a zero-liability policy,” which most cards do nowadays, and certain charge back rights for botched projects.

3. Avoiding Hassles When Traveling

Here is the kicker. Using cash or debit cards for hotels and car rentals is sometimes impossible, and when it is possible, it’s a pain. You’ll often get asked for a cash deposit, and they may put a hold on your bank account for hundreds of dollars. As puts it, “It is often possible to rent a vehicle using a debit card – just expect more hassles and more time at the rental car counter.”

Traveling has enough hassles, and these are especially annoying. Car rental agencies might even run a credit check, which means an extra hard inquiry on your report. Why? If you don’t have a credit card, car rental agencies may see you as a risk. You may damage the car beyond the rental cost and the insurance limits, and they want to know you’re good for it. In addition, if you use cash or debit, you’ll miss out on the secondary car rental insurance that many credit cards offer. So why jump through hoops when a credit card makes the whole process so easy?

4. Paying for Recurring Service Charges

If you value your time, setting up recurring credit card payments for charges like cable, utilities, and subscriptions is a great idea. You’ll even save a few dollars on postal stamps. Plus, you’re unlikely to forget to make a payment, which means no late payment penalties. Be careful with subscription services, though. Automation goes both ways, so if you need to cancel a service, don’t forget to find that button or pick up the phone to avoid being charged for services you no longer use.

If you do this, consider using a rewards or cash back card to set up recurring payments. This is a great way to get a small, but consistent, passive income. Another thing you may want to do is use an automatic bill payment option, if your bank offers this service. Just link your credit card to your bank account and the bank will pay your credit card automatically (assuming funds are available).

5. Credit Cards and Business-Related Expenses

If you run your own business, a small-business credit card can separate your business and personal expenses. In addition, business credit cards usually feature valuable financial management tools to track spending, itemize expenses, and keep your financial data at your fingertips.

Unfortunately, in the minds of many, the words ‘credit cards’ and ‘credit card debt’ have become intertwined, but it doesn’t have to be this way. In fact, millions of people use credit cards regularly without paying a single penny of interest, late payments, or other fees. Just pay all your charges in full by the due date, and you will stay out of debt while enjoying your credit card’s free built-in protection benefits and time-saving features.

*Exact terms vary from card to card, but most of them offer at least some of these benefits.
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