Credit cards have such a bad rep among finance experts. They normally advise you to stop or minimize your credit card spending if you want to save money. While they’re not wrong, there are also times when swiping gives you more perks than dumping some bills.
As with anything in life, moderation is key to spending your credit card wisely. Having too much credit card debt hurts your finances, making lenders unwilling to give you a loan. And, of course, banks will be on your tail if you failed to pay.
When you encounter these instances, however, taking out your card is absolutely fine and can, in fact, be a smarter decision. Below are the moments swiping should feel guilt-free:
1. You’re Buying an Expensive Consumer Item
Clothing, jewellery, cars, and home appliances are some examples of expensive consumer items. When you’re on the hunt for one of those, paying in cash gives you less protection than using your card. That’s because most credit card providers offer benefits for expensive consumer item purchases. You can have protection against damage, theft, or loss of the item for 90 to 120 days after purchase.
This benefit is known as purchase protection. It’s basically insurance for the products you buy with your card. For example, if you bought a refrigerator that malfunctioned a few weeks later, the purchase protection will cover its repairs.
2. You’re Shopping Online
If you’re buying from an online shop you just discovered, paying in cash can put you at risk of being scammed. Let’s be honest — how often do you open your packages before paying the courier? Chances are you’re too excited to do that, so you get it over it at your doorstep, then proceed to open the package only when you’re all alone again.
But what if the package doesn’t contain the item you purchased, but some random rubbish instead? In that case, you can’t chase the courier any more because they’ve left. Plus, your order’s not the courier’s responsibility. It’s yours and the seller’s, who must be off hiding by now.
If you had paid with your credit card, you would’ve been able to get your money back. You can mail your package to the bank and receive a refund. In the end, the fraudulent store gets nothing.
3. You’re Refilling Your Tank
Many cards offer rewards for gas station purchases. Just be extra cautious because card numbers are frequently stolen in gas stations. But if your card has excellent fraud protection, you can worry less.
4. You’re Dining Out
There are many irresistible credit card promos in restaurants. Some offer double or triple bonuses or cash-back bonuses. Bonuses are dollar points you get from spending a certain amount of money. For example, for every $500 purchase, you receive a $150 bonus. Cash-back, on the other hand, means getting a percentage of your purchase rebated. Some cards rebate 3% to 6% of purchases from selected restaurants. These genius perks make dining out more fun and worthwhile.
5. You’re Booking a Trip or Flight
You can also get many benefits from using your card when booking a trip or paying for airfare. Bonuses can also come in miles, which you can use to save money on your next flight ticket purchase. There are also travel cards, which offer bonus points on all travel spending. But the best thing about using your card for travelling is the protection it offers. If your trip is cancelled or your luggage doesn’t reach your destination, you can receive coverage from your credit card provider.
Keys to Control Credit Card Usage
It’s easy to overspend with your credit card if you become obsessed with finding bonuses, cash-backs, reward points, and other perks. If you feel like your self-control is breaking, that’s the time to listen to the experts: start reducing your credit card debt.
Don’t forget that you have to pay the banks back for your purchases. It’s not free money. Your debt may also come with interest. And most importantly, every card has a limit.
If you’re always on time with your payments, your provider may reward you with a higher limit. But that can tempt you to spend even more. To stay on the right track, avoid using all your available credit. Your balance should not exceed 30% of your limit. Set your own limit as well, based on your income and other expenses. In other words, buy only what you can afford. Usually, when you can’t pay for something in cash, it means you can’t afford it. So before taking out your card, consider whether you’ll also pay for that item in cash in a heartbeat. If your answer is no, postpone the purchase, and wait until you’re more financially stable again.
A credit card is supposed to be useful and helpful, especially in times of urgent need. It shouldn’t jeopardize your financial freedom. So even if it feels like free money, treat it as a debt, which it actually is.