When To Use Your Card

The simple and ideal answer would be “all the time.” Using a credit card for nearly all your every day purchases can be a great way to organize your finances and get some free rewards. However, it can become a huge disaster in the wrong hands.

Stop reading this article right now if you know you have poor impulse control. A credit card is not a blank check. You should only spend what you can afford, and always pay off your credit card every month. The government may be able to pass a budget with more spending than income, but if you try to follow their lead, you will find yourself in a world of hurt.

Protection is one of the strongest advantages of a credit card purchase. When you have a dispute with a seller you work with the credit card company. The credit card company will deal with working with the seller, and the company employs people to wrangle with fraudulent or unprofessional sellers. With debit, checks, or cash, the money is gone and unless you can twist the seller’s arm, a lawsuit becomes your only option for getting your money back. Consequently, all online purchases, auctions, marketplace sellers, or small business transactions should be charged.

Decreased liability risks prove to be another advantage of using a credit card. When giving your information over relatively unprotected channels (restaurants where the card is out of your sight, shared network connections, or computer systems you do not own) you should use a credit card. As stated in the previous article (The Dangers of Debit) your liability on a credit card is less risky than on a debit or check card. No one can steal your identity or funds if you use cash, but if you lose your wallet, the cash inside is hardly ever going to make its way back to you. For more security, many credit card companies offer virtual numbers for use online. Check with your credit issuer for such programs.

You can get free stuff when you pick the right cards. Using credit cards to rack up miles or get cash back will reap additional benefits for you.

The convenience of a credit card has become a much larger reason for using them. Nearly everything takes a credit card now. Many people like the convenience of carrying a card around instead of cash, travelers checks, or personal checks. Just like online banking, you will also receive statements summarizing your spending. Some companies can sort your statements by merchant categories to give you an idea of where your money goes, and some companies will send you quarterly and annual summary statements showing you your spending for the quarter or year. This information is extremely valuable to analyze your spending.

Bargaining may require you to trick with a credit card. Merchants pay a certain percentage of their sales to the credit card networks as fees for the service. Sometimes you can use this to your advantage. When paying with a credit card, ask for a discount if you pay cash. This usually works with smaller businesses that want to maximize profits. On average the processing fees cost the merchant around 2%.