Ten reasons to use a credit card for every purchase

Filed In Credit Cards ♦ Last Updated March 14, 2008

Many personal finance sites love to pick on credit cards. The credit card industry is an easy target. Don’t get me wrong, some of the reputation is well deserved. However, the savvy and disciplined consumer can take advantage of credit cards. Like any tool, credit cards, used responsibly, can make life easier.

I’ve compiled a top ten list of credit card features that I think are worthwhile. This is a follow up to my previous article about protected yourself with credit cards. At some point I’m sure I’ll also compose a top ten list of reason NOT to use a credit card. My job here is to present the facts as I see them and let you make the decision. I’m not Dave Ramsey and I’m certainly not your mother, I can’t tell you what to do.

Without further ado, here is the list:

  1. A Month of Free Money

    If you pay off your balance every month, you are essentially getting an interest free loan from the credit card companies. As insurance I’ve set up an automatic payment that will pay the minimum due just in case I forgot to the pay the balance. My company also allows you to automatically pay the entire balance every month. I might switch to that at some point.

  2. Cash Back / Rewards Program

    Some cards offer a one percent cash back program. The program I use gives me a point for every dollar I spend. Those points are then redeemable for products, travel or cash. I always take the cash.

  3. Travel Protection

    Visa has a service that will help you locate services while traveling. For instance if you need medical care in Jamaica, they could refer you to a doctor that speaks English or allow the local medical care professionals to consult with doctors back home. They can also help you find lost luggage, get emergency transportation, legal help, and other services.

    You also get travel accident insurance which covers “death and dismemberment.” That‘s not a very pleasant thought but again, it’s free.

    The lost luggage reimbursement will pay the difference between the real value of your luggage and what a airline will pay.

    Roadside Assistance, which means they call the tow truck and you pay for it. If you are in an unfamiliar place, having someone locate a reliable roadside service provider might be a real relief. This would have come in handy for me several times in the past. One time we broke down in Eddyville, Kentucky at about 5 PM. The whole town was shut down and we had to call the owner of the local parts store to get him to open up and let us buy a new alternator and a set of wrenches so we could replace our own alternator. Not fun considering we also had to bum a ride from local to go to the next biggest town that had a Wal-Mart so we could get a set of decent wrenches. The ones from the auto store were complete junk.

  4. Extended Warranty

    You can register your product with the warranty management service and usually get an extra year of warranty protection on a product. Considering the fact that most manufacturers only warranty their products for a year now, getting an extra year is pretty good.

    Just make sure you register your product. You usually have to sign up with the card’s warranty protection service and then register each product you buy. It’s worth it; just make sure you do it.

  5. Charge Back Rights

    As I said in my previous article about protection yourself with credit cards [Ten reasons to use a credit card for every purchase.doc], this is a must have feature. Most transactions go smoothly. However, every once in a while, something goes wrong. The merchant (store, website, etc) either messes up or they just plain rip you off.

    Dealing with the merchant is usually a pain. If you try in good faith to resolve the issue with the merchant and you can’t get anywhere, you credit can probably help. Call and talk to the disputes resolution department at your credit card company. Explain the situation and the steps you’ve taken to resolve the issue yourself. The can initiate a dispute with the merchant.

    Believe me; nothing gets the merchants attention faster than having the credit card take your money back. I’ve had very good luck in the past with this procedure. Some merchants even contacted me right away to try to resolve the problem. Funny how that works, isn’t it?

  6. Discounts

    Your credit card may offer you discounts for gas or other products. Many times the credit card will offer promotions through certain stores. The promotion is either a percentage discount or a fixed dollar discount (like $20 off). If this is a store or merchant that you shop at anyway it could save you some money.

  7. Loss Protection

    Your purchases are can be replaced or repaired or the price refunded in case of loss. This doesn’t mean if you misplace it. This is the insurance definition of loss; basically fire, flood, etc. This is usually limited to 90 days from the date of purchase.

  8. Categorized Expenses / Online Statements

    Most companies have pretty good websites now. You can view your balance, get previous statements, usually as PDF files and download transactions into Microsoft Money or Quicken. Some companies will even categorize your expenses for you. This is very useful, especially if you are running a small business or are self employed.

  9. Reserve Hotels and Rent Cars

    Most hotels ask for a credit card number to reserve rooms. The secret is that a debit card will work just fine also. However it’s usually convenient to book a hotel with a card and the just put the room charges on the same card.

    It’s been awhile since I’ve rented a car but most places want a credit card. I’m guessing a debit card would work also, but I’m nervous about giving a rental car company unlimited access to my checking account.

  10. Financial Protection / Piece of Mind

    I’m lumping in fraud protection, limited liability and a few other benefits into this one. You are protected from fraud and have only a$50 liability for lost or stolen cards under federal law. MasterCard and Visa have reduced this liability to zero, meaning you don’t have any liability for lost or stolen cards.

    As mentioned above, you can use a debit card in place of a credit card. However, I’m a bit nervous about tying my checking account to every purchase. Banks are good about protecting you but I don’t want the hassle of someone mis-keying $50 as $5000 and accidentally overdrafting my account.

    Credit cards provide a nice buffer between merchants and my money. If they rip me off, I’m protected. If they make a mistake, I’m protected. I like the piece of mind I get with that.

Conclusion

Please note that I only recommend platinum (or better) cards as they typically have these features. Your credit card may or may not offer these features. Make sure you use a tool like Bankrate.com’s advanced credit card search. By default it searches for the best deal if you pay off your balance every month.

Again, I can’t emphasize enough that credit cards are a good tool only when used responsibly. Having gotten into credit debt in college, I learned the hard way how tough it can be to pay them off. However, I can’t in good conscience tell everyone to avoid credit cards just because some people use them foolishly. Obviously, if you have a problem using credit responsibly, then you will want to avoid credit cards.

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