Amassing credit card debt under exorbitant interest rates can spell financial doom. But there are times it makes sense to use that little piece of plastic. For some consumers, maximizing rewards is reason enough; others like paying a single bill at the end of the month. For those who are not convinced, here are 16 situations when paying with a credit card beats using cash.
Start with the basics: It's dangerous to carry around a lot of cash, either because it makes you a target for robbery or theft, or because you might just drop it accidentally or leave it somewhere forgetfully. It can get dirty or torn up in any number of ways. Every year, the Treasury Department "receives more than 22,000 requests for examination of mutilated currency for possible redemption each year, with an estimated value in excess of $35 million," according to the department's Bureau of Engraving and Printing.
Related: 12 Best Credit Cards for Seniors
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 can add a year of coverage at no cost. If an extended warranty is still important to you, consider a Citi card, which has pushed extended warranties into a full two years.
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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 sometimes refund the difference if an identical item has lower advertised price anywhere within 30 to 120 days of purchase, depending on the card. Rules vary, but in general people who like to maximize their shopping might want to look for a card from Capital One, according to WalletHub.
Protection policies don't always apply to business purchases, unless a business credit card is used. These cards — American Express and Ink are standouts — 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.
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. Credit Karma identifies Chase Sapphire as a leader in this perk.
Cards that offer bonus points for travel might include taxis or services such as Lyft and Uber among the eligible purchases. There are many cards you can get to take advantage of paying for car trips, according to NerdWallet, and public transportation trips (like by 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% back (on up to $6,000 in purchases each year) when spending on these necessities, NerdWallet notes.
Everyone likes to complain about the price of gasoline, but bonus points that accrue for filling up are one way to soften the sting. For the American Express Blue Cash Preferred Card, it's 3% unlimited cash back on purchases at all U.S. gas stations — no spending caps or other restrictions, Money Crashers says.
There's still some risk involved with giving 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.) Some programs look automatically for unusual, duplicate, and auto-renewal charges and then alert 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.
Travel can be such a hassle, especially the drawn-out security lines before getting to the gate (and especially if you tend to run late on the way to the airport). The TSA PreCheck program lets travelers into a speedy lane where they keep shoes, belts, and jackets on, and their laptops in bags — and there are 39 credit cards and loyalty programs that cover the application fee ($78 to $85) or at least allow credit toward it. That's up from 28 just a couple of years ago.
Lay out cash every time you buy groceries, eat out, or swing by a Target, Walmart, or dollar store and you'll be obliged to keep receipts, balance a checkbook or bank book, and likely transfer it into a spreadsheet or do some heavy-duty searches when it comes to be tax time. Credit card statements are easy to look through and available online, and spending-tracking apps make it even easier by consolidating the information in one place. (Credit Karma will even suggest better credit cards for how you tend to spend.)