A purchase made with a credit card can offer more protection than if you had paid cash... |
The current recession has illustrated the importance of using credit wisely for many people. There are obvious advantages to having credit available: you don’t have to carry large amounts of cash in your pocket, you can draw upon it in times of true need, and it can be a good way to make major purchases interest-free for over a month, depending on your credit billing cycle. Here are some other ways that you can use your credit cards wisely.
Increase Your Credit Score: Yes, credit cards can actually boost your credit rating. If you are young and need to establish a credit history, or you have been through a bankruptcy and need to start fresh for instance, wise use of credit cards can establish a basis for a high credit score, which can in turn allow you to borrow money for investments such as a house or business. Keep your balances low or pay them off completely each month and make your payments on time.
Protect Your Purchases: A purchase made with a credit card can offer more protection than if you had paid cash. Under the Fair Credit Billing Act, if something you purchased with a credit card is damaged or defective, you can withhold payment. As long as you can prove that sincere efforts were made to contact the merchant and correct the problem, the credit card company will need to get involved and try to resolve the situation as well. Eventually, if despite everyone’s best efforts it can’t be resolved, you won’t be charged for the purchase.
Earn Rewards: If you’re the type of person who always pays off your balance each month, you may be able to reap large benefits from rewards cards that offer some type of points or airline mileage. These types of cards often charge an annual fee, so it’s important to shop around and find the lowest fee possible.
Transfer a Balance: If you are carrying a balance on one or more cards, pay special attention to any offers of 0% interest to transfer your balance. In this instance you need to be especially attentive to the fine print because if you don’t pay off the balance by the introductory rate’s deadline, the rate may skyrocket. However, if you are dedicated to paying off the balance, or transferring it again to another card, it could be a smart way to save money on interest.
Rental Car Insurance: Some credit card companies cover you in case of accident if you rent a car. Again, the fine print can be tricky here so don’t just assume that you’re covered or that you’re covered in every instance. Some may only cover what your current auto insurance doesn’t cover. Some credit card issuers only cover benefits on certain types of credit card lines, while still others cover basic insurance for all card holders.
When it comes to using your credit card always be aware of the fine print because, basically, the credit card company has the power. If you are a day late on a payment, for instance, they can raise your interest rates and affect your credit rating. If an offer sounds too good to be true, or you are unsure of the rules regarding use of a particular card, call the credit card company or speak to your financial advisor.
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