3 Things You Probably Didn’t Know You Need a Credit Card For
It’s true that you can get by in life without ever using a credit card. However, you will likely find some transactions to be much more difficult to complete — or in some cases nearly impossible — if you intend to use a debit card or cash instead of a credit card.
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There are also numerous other situations in which a credit card can help protect you during a financial transaction much more than other payment sources can. Here’s a look at transactions that generally require a credit card, along with scenarios in which you should really use a credit card to help protect yourself.
Renting a Car
For many years, you absolutely needed a credit card if you wanted to rent a car. Some companies still require one instead of a debit card. The reason is that a car is expensive, and a rental company is essentially handing you an asset that’s worth tens of thousands of dollars and trusting that you will return it in one piece.
While insurance may cover the damage, a rental company can’t ever be sure you have adequate insurance, and it needs a credit card to have a source of payment in the event it needs to recover money. A debit card may or may not have any cash reserves tied to it, so a credit card is often required. While this is changing in recent years, you should still generally expect to be asked for a credit card when you rent a car.
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Booking a Hotel Room
Just like with car rentals, hotel rooms traditionally had to be booked with a credit card. Although some chains are softening in this regard by allowing debit card or cash deposits, a credit card is still generally the preferred method. The reasoning is the same as above.
Furnishings in most hotel rooms cost hundreds or even thousands of dollars, and if you damage the hotel’s property — or try to skip out without paying your bill — it can have a verified source of payment. As with car rentals, using a credit card can work to your advantage also. If you are mischarged, for example, you can dispute it with your credit card company.
Paying for Things in a Foreign Country
While you can use a debit card nearly everywhere in America, things can be different if you travel to a foreign country. In many cases, a U.S. debit card just won’t cut it. While you may be able to pay cash, this can often be an inconvenience.
On the other hand, a credit card is accepted at most major tourist destinations overseas, and it can also offer you some consumer protections. For example, if you fall prey to a scam or purchase bad merchandise, you may be able to work with your credit card company and avoid having to pay. Just be sure to use a credit card that doesn’t charge you a foreign currency conversion fee, as some cards will charge you an extra 3% for the privilege.
Things You Should Always Pay for With a Credit Card
Beyond the places that absolutely require that you use a credit card, there are many financial transactions that would work to your advantage if you used a credit card to pay for them. For starters, in most cases, your card is immune from fraudulent charges. Although legally you may be liable for up to $50, most card issuers guarantee against fraudulent charges in any amount.
Cards can also get you rewards and other benefits that make their use valuable. For example, you may earn 1.5% or more in cash back on all your purchases using a card, or hotel points or airline miles. Many credit cards also provide you with additional benefits, such as purchase protection, free baggage when you fly or elite status with hotels and airlines.
Extended warranties, primary car rental insurance and bonus rewards for shopping within certain categories are also common credit card benefits. Just be sure to pay your entire credit card balance in full every month or your interest charges will negate any benefits you earn.
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