Amassing credit card debt and bearing the weight of exorbitant interest rates can spell financial doom. But there are many circumstances in which it makes sense to use that little piece of plastic. For some consumers, maximizing rewards is reason enough, while others like paying a single bill at the end of the month. For those who are not convinced, here are a baker's dozen situations when paying with a credit card pays off.
New electronics and appliances are generally covered by a manufacturer's warranty, but vendors try to convince consumers to opt for an extended plan. Buying with a credit card, though, already adds a year of coverage at no cost. Details vary, so check CreditCards.com for a handy comparison chart.
Some credit cards offer purchase protection that reimburses the cost of an item stolen within 90 days of purchase. Some also protect purchases in case of accidental damage.
Worried about buying something moments before the price drops? Use a credit card. Programs such as Citi Price Rewind and price protection policies from MasterCard and Discover refund the difference if an identical item has lower advertised price within 60 to 90 days of purchase. Depending on the program, buyers might need to register a purchase or initiate the refund.
Protection policies don't always apply to business purchases, unless a business credit card is used. These cards often include higher limits for purchase protection claims and offer automatic rebates for purchases at select retailers.
It used to be that carrying around a wad of travelers checks was the way to go, but no longer. Aside from certain destinations that favor cash above all, handing over a credit card is the easiest way to pay while abroad. But be sure to carry a card that does not charge a foreign transaction fee. Some, such as World MasterCard, also offer medical and legal referral services to cardholders abroad.
Coverage benefits vary by credit card, but drivers who pay for the entire rental amount with plastic can usually opt out of the agency's rental collision damage waiver insurance. The card's protection will not cover liability -- damage to other people, property, or vehicles -- and is considered secondary coverage. This means a driver's auto insurance policy must be used before the credit card's CDW insurance kicks in.
Paying for a plane ticket with a credit card often covers bags and their contents that are lost, stolen, or damaged. If luggage is delayed, the card issuer may even pay for necessities, such as clothing and toiletries, while awaiting their arrival. Travel-rewards cards also sometimes include accident insurance, trip cancellation, and trip interruption coverage, as well as free checked bags or priority boarding with associated airlines.
Cards that offer bonus points for travel might include taxis among the eligible purchases. Public transportation (bus or train) sometimes earns rewards as well.
Many cards offer bonus points for purchases made at the supermarket. The Blue Cash Preferred Card from American Express, for example, offers 6 percent back (on up to $6,000 in purchases each year) when spending on these necessities.
Everyone likes to complain about the price of gasoline, but bonus points that accrue for filling up are one way to soften the sting.
There's still some risk involved with inputting credit card information for online purchases, but many card issuers offer liability protection (so consumers will not be responsible for unauthorized transactions) as long as the account is in good standing, the unauthorized use is reported immediately, and the card's information was not knowingly put at risk.
Setting up automatic payments from a credit card helps ensure there's never a late fee for a bill. (Just be sure you understand the cancellation policy so the company doesn't go on charging your card.) Capital One's Second Look program automatically looks for unusual, duplicate, and auto-renewal charges and alerts cardholders if something looks amiss.
There's little recourse when cash gets stolen, and a credit card offers better fraud protection and less liability than a debit card, which is linked directly to a bank account. Still, sticking with a debit card or using cash may be wiser for consumers who have trouble managing cash flow or paying a credit card balance in full every month.