Credit cards offer benefits like purchase protection, travel insurance, and fraud monitoring, but they should not necessarily be used for all your purchases. Yahoo Finance Senior Credit Cards Writer Kendall Little joins Wealth host Brad Smith to explain how to know when you should use your credit card.
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How do you know when you're supposed to use each card? Joining me now on this, we've got our very own Kendall Little, Kendall. Let me break this down. What purchases should you be putting on a credit card?
Yeah. So, you know, we all want to earn those rewards, points and cashback, but even if we look beyond that, there are some benefits to some purchases of using a credit card. One is going to be large purchases. Um, a lot of credit cards have benefits for purchase protection and extended warranties. So that can be really helpful to make sure that you're protected against damage or theft when you buy big purchases, like a new computer or an appliance for your home. Another one is going to be travel. Other credit card benefits often include, uh, trip cancellation or trip delay insurance and even lost luggage benefits. So when you're booking your hotels and your airfare with a credit card, you can sort of unlock those protections. And then finally is online purchases, and that's going to help protect you against fraud. A lot of credit card issuers have zero liability against fraud and even fraud monitoring, so you can catch if your credit card information is stolen almost instantly. And then because that money isn't taken directly out of your account, the way it might be with a debit card, you can sort of resolve the issues faster.
So when do you know to stick with your debit card on the other side of that?
Well, I always like to tell people to use their credit card like a debit card anyway. So that means only spending what you know you can afford to pay off every single month. Um, but if you do have issues with overspending or maybe you're focused on paying down existing credit card debt that you have, it can make sense to switch back to a debit card, even if that's only temporarily.
So what if someone's just starting out with credit cards? How should someone that's just beginning transition to using them without overspending? And this probably could have helped me when I was, you know, a young 20 year old just getting into New York.
Yeah. So a lot of the tips for overspending are going to apply no matter what payment method you're using, but one good thing you can do is sort of step back when you're about to make a big purchase. Take a couple days, take a beat, make sure that that's not an impulse buy that you're going for. You can also, specifically with the credit card, make sure that you're not keeping that card information on a retailer's website. That just creates another barrier between you and making the purchase if you have to actually enter your card information rather than just clicking purchase. And then finally, I'd say, you know, make sure that you do have a budget that you can stick to. So, again, using your credit card like a debit card, you don't want to spend any money that is not in your account. That can lead to overspending, but if you have that budget and you know what you can spend, you can sort of avoid those pitfalls.
