Texas Trust Money Management Advice

Money Management

Smart Purchases to Make on Credit

Credit cards are outstanding financial tools to have on hand for life’s little emergencies. What you may not know, though, is that some items can be considered 'smart purchases' to make on your credit card, even if you have the cash to pay upfront. Below you will find some smart buys to make with your credit cards as well as unwise credit card purchases you should avoid at all costs.

Good Uses of Credit Cards

Using credit cards for certain purchases provides a few unexpected perks and benefits well worth considering, especially when it comes to protecting you, the consumer.

Appliances and Electronics

With many credit card companies offering free extended warranties for items like washing machines, refrigerators, and televisions purchased with credit cards, it is a no-brainer to make these purchases with your credit card. That is especially true if you can pay the balance in full at the end of the month. You are getting an extended warranty for free without paying interest if you pay the balance in full.

Recurring Monthly Bills

That is, of course, assuming you are going to pay the balance in full each month. However, paying recurring bills with your credit card allows you to shift all the smaller payments that come at different times each month to one single payment you pay once a month. It is a great way to ease the burden of paying bills, by making it a single transaction rather than 15 or 16 different ones. Plus, if you earn cash back rewards on your cards, you are getting a small reward for your efforts.

Travel Plans

Vacation and business travel expenses can add up quickly. However, if you use your credit cards to book your hotels and travel arrangements, you get the added benefit of a few key ingredients that add peace of mind, including things like:

  • Trip cancellation coverage
  • Emergency services
  • Medical assistance
  • Rental car insurance
  • Travel insurance

While these benefits may vary somewhat from one card issuer to the next, many credit card providers offer them to remain competitive. Additionally, most credit cards provide substantial rewards for travel plans booked through them in the form of free or discounted travel, free upgrades, and cash back.

Items to Avoid

While the items listed above are excellent choices to buy with your credit card, there are also things you want to avoid buying with your credit card whenever possible. Primarily because the costs of purchasing these items with credit cards, once you count the interest, are prohibitive, like those listed below.

Household Bills

It is one thing to put smaller recurring charges you can pay off in a month on your credit card. If you can do that, that is great. However, this only works if you can repay the full balance each month. Otherwise, it becomes a growing debt you will never easily escape thanks to interest.

Student Loan Repayments

There are less expensive options than credit cards to try to get your student loan debt under control. Look to income-based repayment plans, loan deferrals, and other options before resorting to using credit cards to repay the debt.

Shopping Sprees

Retail therapy may provide a momentary boost to your mood. However, when the bill comes due it can become a bitter pill to swallow. Use cash for those mood lightening shopping sprees and leave your plastic at home.

Takeaways

Credit cards have their uses. They can be vital tools in your long-term financial planning, but only if you use them responsibly. Following these tips can help.

Please note, information and interactive calculators are made available to you as self-help tools for your independent use and are intended for illustrative purposes only. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.