Not everything about credit cards is bad. If you're smart about them and pay your bill in full each month, then these ten benefits can bring you big savings.
#1. Return Protection.
Have you ever tried to return something, but the store refuses to accept it? Recently that happened to me when I tried bringing back a shirt. Because the purchase was made more than 30 days ago, the retailer wouldn't take it back.
Fortunately, the American Express card I used to buy the shirt provides return protection. With this benefit I get reimbursed up to $300 per item (a max of $1,000 per year) if a store won't accept my return within the first 90 days. Generally speaking, only brand new items qualify; used or perishable will not In addition to AmEx, a few Visa and MasterCards provide this benefit.
#2. Free Credit Scores.
Don't worry, I'm not talking about those dubious "free" credit score offers you see on TV. Rather, I'm talking about credit cards that give free access to your score as a cardholder benefit.
Although I rarely recommend store cards, they can be useful for rebuilding credit because the approval process is easier. The Sears card, for example, provides free access to your TransUnion Transrisk score, which is updated once per month.
#3. Free Cell Phone Insurance.
To the best of my knowledge, this benefit is included on only one card, the Citi Forward. This card has no annual fee and is best known for its restaurant rewards, but another unique benefit is the Forward's cell phone insurance. If you pay your monthly cell phone bill using the card, you get supplemental coverage of up to $250 in the event your phone is stolen or damaged.
#4. No Foreign Transaction Fees.
If you travel internationally, then you already know about these pesky fees. A surcharge (usually 2-3%) is tacked onto every credit card purchase you make outside the U.S. There are, however, a small number of cards on the market that don't charge these fees.
Currently, none of the credit cards issued by Capital One charge for foreign transactions. This issuer also offers a few cards with no annual fee, which is another way to save. You can find other credit cards with no foreign transaction fees, but unfortunately they charge an annual fee.
#5. Free Extended Warranty.
Next time you buy a new computer, make sure you pay for it using a credit card with this benefit. It automatically doubles the manufacturer's warranty by adding up to one year of additional coverage absolutely free. A lot better than spending big bucks on the store's extended warranty, right?
All American Express cards offer this benefit, as do many Visa and MasterCards (such as the Visa Signature and World MasterCard tiers). I know of someone who had their $800 computer replaced thanks to this valuable benefit, but not every purchase qualifies. The "exclusions" list is quite long and consists of items like motorized vehicles, household fixtures, light bulbs, medical equipment, and etc., so be sure and check the benefits guide first.
#6. Car Rental Coverage (But With a Catch).
The vast majority of major credit cards offer an "Auto Rental Collision Damage Waiver" for free. It's important to understand how this car rental insurance works, because it's probably not what you're expecting. For starters, the coverage is secondary (it pays out after your regular car insurance). Secondly, only some types of damage are covered (vandalism and weather damage is not). Third, most trucks and SUVs are excluded. There's a mile-long list of other caveats, too.
That being said, there are a few cards on the market that offer "primary" coverage. This is a better deal because it pays out first, which means there won't be a claim made on your personal auto policy (which might affect your rates).
#7. Purchase Protection.
This is probably my favorite benefit. The way it works varies by issuer, but generally it goes something like this: For 90 days from date of purchase, you're protected in the event of theft and accidental damage. For example, if you bought a glass bowl and dropped it on the floor a month later, you will probably be able to get reimbursed through your credit card company.
This benefit is usually available through the same cards that offer the extended warranty benefit (American Express and higher level Visa/MasterCards). The version from Visa, known as Purchase Security, is much more restrictive on the types of eligible damages; only damage due to fire, vandalism, accidentally discharged water, and certain weather conditions qualify.
#8. Travel Discounts.
This benefit is good, but not great (and I'll tell you why in a moment). Some credit cards offer various discounts and coupon deals at partner hotels, car rental agencies, and cruises. For example, the Blue Sky from America Express provides incentives for spending at Hertz, JW Marriott, and Norwegian Cruises.
So why is this only a so-so benefit? Because you might be able to score greater savings by going outside of the credit card company. Check out Cheapism's cheap travel section to see this for yourself.
#9. Free Roadside Assistance.
AAA memberships typically run around $60 or more per year, depending on your location and when you signed up. With the basic plan you get up to four service calls per year. Not a bad deal if you use them, but did you know there are credit cards that offer the same thing for no additional cost?
For example, the Gold, Gold Premier Rewards, and Platinum cards from American Express toss in up to four service calls per year for no extra charge. Of course the drawback is that those cards also come with hefty annual fees, but for avid travelers, they sometimes make sense. If you happen to have one of these cards, there's no point in paying for AAA unless you're doing so to get the other benefits the organization offers, such as DMV registration and travel discounts.
Be careful, though, because this benefit is not to be confused with a similar sounding "roadside assistance dispatch" benefit, which shows up on many no-annual-fee cards. With this benefit, the credit card company only arranges roadside assistance but doesn't pay for the service.
Last but certainly not least, this list would not be complete without mentioning rewards, which many consider to be the best credit card benefit of all. Given all the 2% cash back credit card offers on the market, it makes little sense to pay for purchases using debit or cash. However, 2% cash back doesn't compute if you're going to carry a balance and pay 20% interest, so only chase the rewards if you pay off your account in full every month.
Mike Dolen is the President of CreditCardForum.com, which is a website for discussing and analyzing credit card deals.