Every time you make a purchase, considering your payment options is a good idea. In some cases, using credit cards is the best move.
Credit cards provide buying power and may offer rewards, benefits and purchase protections, says John Ulzheimer, a credit expert who has worked at credit-scoring company FICO and credit bureau Equifax.
“You can’t really make a similar claim for a debit card, a prepaid debit card, cash or any other payment method,” Ulzheimer says.
If you’re not sure when to put a purchase on plastic, you are not alone. But most of the time, you may be better off buying these nine goods and services with a credit card.
1. Big-Ticket Electronics, Furniture and Appliances
When you use a credit card for a large purchase, you might get extra protection that could bring you peace of mind, Ulzheimer says. “It will vary by card. Sometimes it will extend the life of the manufacturer’s warranty,” he says.
Price protection refunds you the difference if an item’s price drops within a certain time frame. Purchase protection can repair or replace your item or provide a refund if it is damaged or stolen within a distinct window from the purchase date.
Although these protections fly under the radar when it comes to card benefits, they are handy when you buy, say, a costly flat-panel TV or bedroom set.
And don’t forget about the ease of using your card, Ulzheimer says. You’re safer walking into a big-box store with a credit card than a stack of cash.
2. Travel Accommodations
Booking travel with a credit card can give you all sorts of perks and savings, says David Almonte, a certified public accountant and a member of the National CPA Financial Literacy Commission of the American Institute of CPAs.
Your card might provide rental car insurance and travel insurance to cover lost luggage or costs from trip delays, he says.
“I found this out the hard way years ago. When I started reading up on all these things and asked my card companies what the protections were, I had no idea,” Almonte says.
And he’s not alone. Only 8.5% of cardholders used their credit card trip cancellation or auto rental insurance in the last 12 months, according to a U.S. News survey of travel credit card users.
Almonte recommends going online to review your card’s suite of benefits. You can also study the cardholder agreement you got when you opened the account.
You might find out, for instance, that your first bag is checked for free or that you get priority boarding. “These things can make a big difference,” Almonte says.
When booking lodging, don’t forget that hotels will authorize your card to ensure it has enough funds for your stay.
If you use a debit card, you will have a brief “hold,” or block, on a fixed amount to cover your room and incidentals. With a credit card, if you’re not close to your limit, a hold has little effect because it ends before your bill is due.
3. Purchases While You’re Traveling
Use credit cards when you’re out of town or abroad in case your wallet is lost or stolen.
“If you have a card that is compromised while you’re on vacation, some issuers will FedEx you a card the next morning,” Ulzheimer says.
Some banks can reissue debit cards quickly, too.
Still, 26% of millennials say they prefer to use cash while traveling, according to TD Bank’s 2019 Consumer Spending Index.
But bringing wads of cash is just not practical and can make you a target for thieves, as can debit cards.
4. Online Purchases
Simply put, using debit cards online is not a great idea, Ulzheimer says. “When using a debit card, you expose yourself more to fraud than with a credit card,” he says.
With a credit card, even if hackers access your account, your card issuer may limit your liability to $0. The most it can be by U.S. law is $50.
With a debit card, you may not get your money back right away while the bank investigates, and you could be liable for up to $500.
Even worse: If you don’t spot the fraud and report it within 60 days, you could lose the full amount stolen.
“You never want to be in a scenario where your debit card has been compromised, and money has been siphoned out of your account,” Ulzheimer says.
Then, you’ll have to worry about checks clearing and bills coming due. On the other hand, you can freeze a credit account, report the fraud, get a new card and move on.
5. Purchases That Boost Your Rewards
Many credit cards offer rewards such as sign-up bonuses, cash back and points when you make purchases.
“If you’re going to spend money anyway, you might as well get the benefits from it,” Almonte says.
Ulzheimer agrees, noting: “If you use cash, the only ‘cash back’ you’ll get is maybe some change.”
Some cards let you boost rewards with spending in certain categories, such as travel, groceries or gas. Sometimes those categories rotate.
“Make sure you get a credit card that matches your spending habits,” Almonte says. And be mindful when choosing a card for each purchase.
When Almonte travels for work, he says he books flights using an airline card to get lots of miles and earn free flights. He doesn’t travel as often now and opts for cash back cards with extra rewards for grocery spending.
But a word of caution: Gaining from rewards cards means paying your bill in full each month. More than 25% of cardholders carry a balance at least seven times a year, likely costing them more rewards than they earn, according to a 2018 U.S. News survey.
6. Gas Purchases
Using debit cards to fuel up, as with debit cards to buy items online, can be a dangerous move.
Credit card chip readers, which help prevent card fraud, aren’t required at self-service gas pumps until October 2020. This means your card data is easy to steal with a card skimmer when you swipe at the pump rather than insert a chip.
You could use cash, but because you have to go inside the station to pay, a card may be faster when you’re on the road.
Ulzheimer says using a credit card to pay for gas is your best move. “Skim my card? So what? I’m not liable for it,” he says. “Use a credit card, swipe, fill up your car, and leave.”
7. Monthly Bills
From your toll account to your gym dues and streaming services, recurring bills are easy to neglect. Credit cards, though, can be your best tools for bill payment, Almonte says.
“But using a credit card without a plan is like going skydiving without making sure your parachute is packed,” he warns.
Although Almonte uses autopay often, he also follows a strict budget and knows each monthly charge.
Check to see whether autopay provides any perks. For instance, if you use some credit cards to pay your monthly cellphone bill, you can access insurance if you lose or break your device. Policies may allow claims ranging from $200 to $600.
8. Professional Services
Say you hire a contractor to do work in your home or someone to design your website, and you’re not pleased with the results. You can try asking for your cash deposit back, but good luck with that, Ulzheimer says.
With a credit card, you can initiate a dispute and may be able to receive a refund.
Each card’s dispute process varies, but no matter what, you will have more leverage by paying with a card instead of a check.
9. Tax-Deductible Items
If you are self-employed and need to track your expenses for tax record keeping, using a credit card can help you stay organized.
Many credit cards provide a detailed yearly summary you can search and filter to see your spending in categories from business services to travel, Almonte says. It sure beats keeping paper receipts in a shoebox.