Smart Uses for Credit Cards

There are a few situations where using your credit card has some distinct advantages over paying with cash. For example, there’s protection in plastic when you make big purchases, like a TV. If your purchase was damaged or defective, you can always withhold payment while you and your credit card company work with the vendor to resolve the issue.

That same “buyer’s protection” is also why you should make your credit card the only way you ever shop online. Ditto if you’re using automatic bill pay, where a utility or other company automatically deducts money from your checking account… see if you can switch it to your credit card.

Some credit cards also offer extended warranties on purchases, so if you’ve got it, use it, especially for big buys. Then you can comfortably say “no” when the salesman tries to push an extended warranty plan on you. Find a credit card with warranty protection.

There are even credit cards that automatically categorize your purchases on your billing statements. Knowing where your money goes is a huge advantage when trying to stick to a budget.

And reward programs offer some incentives to shoppers, allowing you to rack up rebates or purchase points towards other items. Just remember that the rewards are only worth a fraction of the money you’ll owe in interest payments if you can’t pay the bill on time. So, they’re a nice bonus, but don’t rush out and buy something you can’t afford simply because of a “double points” or other such promotion.

But the smartest use of credit cards may simply be to help build a good credit rating. Your credit score can get you lower rates when you borrow, help you get a better mortgage, and maybe even a better deal on a things like auto and life insurance. Estimate your current credit score without paying anything to anyone. Just be sure you make a few small purchases every month on your card, and always pay on time.