Like all good things, credit cards have their pros and cons. Many credit card companies offer great promotions like cash back bonuses and zero liability in case of fraud. However, swiping your plastic as your primary form of payment could lead to some serious debt (or, at least, bad financial habits) if you’re not careful about your spending. To help you decide what you should and shouldn’t put on your credit card, here’s Ryan Homes at Brunswick Crossing’s handy guide:
You shouldn’t use your credit card for…
Loans. If you put your student, car or home loans onto your credit card, it could be a detrimental move for your credit score. Typically, if you pay any loans with a credit card, it can require a processing transaction fee and/or increase the amount of interest without the grace period.
Taking out cash. Your credit card and the ATM should not be friends. Known as “credit card cash advance,” taking out cash from your credit card is unwise due to the high interest rates and hidden fees. If there’s an emergency that requires cash and you only have your credit card, then you can consider taking out cash. Other than that, avoid the practice at all costs.
Retail therapy. Though retail therapy can be a great way to de-stress, shopping with only a credit card can be dangerous. Because you can’t see your balance decreasing like cash and there’s no budgeting like a debit card, it’s easy to spiral out of control when it comes to swiping your plastic on clothes, household knickknacks and other frivolous purchases. This also goes for a night on the town. When you’re racking up food and drink purchases without keeping track, you may end up with a bill you can’t afford the next morning.
You should use your credit card for…
Extended warranties. When buying consumer electronics, many people are offered extended warranties in case of malfunction or breakage. Though these warranties typically add an extra cost, some credit cards already include an extended warranty policy that covers the purchase for an additional year beyond the manufacturer’s offered warranty.
Online purchases. Credit card companies are required to watch for fraudulent charges, so if there’s a large purchase made online that you didn’t authorize, it’s easy to reverse the charge, thanks to the zero liability policy we mentioned before. The fraudulent charge feature is also great for traveling. Most companies will call you or stop your transactions if your card is swiped in a different state or if a purchase made doesn’t coincide with your typical bank statements.
Traveling. Most people think that paying for experiences upfront is a good way to run your finances, and while it’s good to have money ready for those purchases, some credit card companies offer great promotions for traveling expenses. Some companies have trip cancellation and/or interruption policies, which cover basic expenses like gas and groceries if your plans go awry. A lot of companies also offer rental car insurance and quick hotel authorization without any deposits.
Like we said before, credit cards have their pros and cons. Each credit card company offers similar features, but make sure you do some research about which company is best for your spending habits. You may even discover that you don't need or want a credit card, but if you do choose to get a credit card, consider our tips about how to spend it.