For many people, using a credit card is an intimidating idea. Managed improperly, credit cards can create the most unwieldy debts because they boast the highest interest rates of any type of loan. Yet, credit cards are necessary, and every modern adult needs one to become a trustworthy borrower.
Though most card companies encourage their cardholders to use credit anywhere and everywhere, almost everyone knows there is a right way and a wrong way to use a credit card. Still, some purchases absolutely are better when made with plastic. Here are five times when credit is the right way to pay.
1. Shopping Online
While a few major online stores accept personal checks, credit cards are the safest and most feasible payment option for most online shoppers. Unlike brick-and-mortar locations, where thieves take from the establishment, online stores are susceptible to hacking, which can uncover shoppers’ sensitive payment information. Checks lead directly to a user’s bank account, and debit cards have no maximum expenditure to curb fraudulent spending. Credit cards are the most secure option; plus, dozens of cards guarantee returns in the event a package is broken, lost, or stolen.
There are also a handful of credit cards that actually reward you for making online purchases. Most major retailers offer store cards that give certain perks when used online. Other cards offer benefits for shoppers of a particular type; for example, entertainment shoppers using the Discover it card earn a bonus 5 percent cashback and unlock Discover Deals, which provides discounts to certain purchases.
2. Purchases You Plan to Deduct From Taxes
If you own a small business, freelance, or otherwise make purchases you hope to deduct from your taxes, using a credit card is a smart way to back up your records. Though you should always keep hold of your receipts, any tax deductible purchase will also appear on your month-end credit card statement. Then, in the unhappy event of a tax audit, you will have ample evidence of your expenditures to show the IRS.
While any credit card will provide backup proof of purchases, some cards are dramatically better for business-related expenses. Chase credit cards, for example, are some of the best for businesses for their high bonuses and their reasonable terms. Nearly any card in the Chase Ink lineup is beneficial to entrepreneurs looking to get a head start.
3. Booking Trips
It makes sense to pay for your travel plans with credit — it also leads to more money and security, as well. Certain credit cards allow you to accumulate points with which you can get discounts on all sorts of travel-related expenses, from flights to accommodations to car rentals and more. Additionally, many credit cards offer a degree of travel insurance which will reimburse you should anything go wrong with your plans.
However, to earn such significant benefits, you must use a travel rewards credit card to book your trip. Fortunately, there are hundreds of different travel credit cards to suit your spending style. The overwhelming favorite across the Web (and around the globe) is the Chase Sapphire Preferred card, which offers big sign-up bonuses and easy-to-earn points.
4. Paying on Vacation
The travel advantages to credit cards don’t cease when your flight departs. To survive the tumultuous market, most vendors have recognized the need to accept every major credit card, and even small, roadside stalls have adopted mobile card readers to make the purchase process easier.
What’s more, credit cards have become nearly universal, which means you no longer need to hassle with cash currency exchanges when you venture overseas as long as you have your trusty plastic. Finally, credit cards are smart payment options while traveling for the same reasons they are perfect online payment tools: They are separate from your savings, which keeps you secure from fraud.
5. Buying Big
Most large electronics, appliances, and furniture are monumental out-of-pocket costs, and you are probably reluctant to deplete your checking account so thoroughly with one purchase. That is why using a credit card for such major purchases is a good idea: It allows you to pay off your purchase in small amounts so you can have your sofa and flat-screen and a healthy savings account, too.
Plus, some cards reward cardholders for buying big with credit. For example, using credit may provide you with an extended warranty for your item in case it breaks, and some credit companies also offer price protection to give you a refund if your item goes on sale during a certain window of time.