When to and when not to reach for your credit card
Published Thursday, January 28, 2016 3:49AM EST
Last Updated Thursday, January 28, 2016 6:05AM EST
I may have a reputation of hating debt, and it is warranted. I don’t like it, but that doesn’t mean I don’t like credit cards. I think they have a place in your wallet and here is when I would pay using a credit card over a debit card:
1) Shopping online: If you are shopping online credit cards are by far your safest option. Credit card issuers have your back and are always on the lookout for fraudulent charges. If you detect any fraudulent activity you can dispute the charge and it can be reversed. You are not liable for unauthorized charges, unlike debit transactions which are the same as cash.
2) Large purchases: If you decide to make a large purchase or buy electronics many credit cards have a warranty protection plan and some even go beyond what’s offered by the manufacturer. Of course the devil is always in the details and you want to be sure of your total coverage and the costs. And of course there are the points to consider and if you have a large purchase you might as well benefit if you can.
3) Travel: Using a credit card for travel is a double edge sword. I wouldn’t use a credit card if I can’t afford the trip. Who wants to pay the bills long after the trip is only a distant memory. However, the anti-fraud protection can be a huge benefit if you find yourself in a tourist trap. Plus, there may be some perks to take advantage of like discounts on rental cars, frequent flyer miles, cash back on purchases and, in some cases, the only way to book a hotel or airline is to use a credit card.
I do use credit cards for all a lot of purchases but there are times when I wouldn’t. Here are just a few of them:
1) Extending warranty: If you are buying a new car and have the option to extend the warranty. You likely will pay less if you roll the cost of the extended warranty into the car loan.
2) Can't pay: If you can’t pay your card off in full and receive notice that rates are going higher. Note to self – stop spending.
3) More than one: If you are using one card to pay off another card – you might be in over your head and need help.
4) Everyday items: I wouldn’t use a credit card that I can’t pay off such as groceries. If you are using credit when you used to pay for things like this with cash – that is typically a red flag.
5) Flea markets: Enough said. Just use cash.
Credit cards can be very useful tools, but try not to make it all about collecting the rewards, have a plan to pay it off and think about the difference between a want and a need. You might want to institute the 24 hour rule as credit has made consumption very easy. If you are thinking about splurging, walk away and have a cooling off period.