Use Your Credit Card Wisely

May 14, 2009
Special Feature

Credit cards can be especially bad because of the debt they can get us into and their sky-high interest rates. But there are some contrarians who believe that using a credit card can sometimes be the best way to go.

It was debt that got us into this economic mess, say the financial gurus, so steer clear of it. Credit cards are especially bad because of their sky-high interest rates. But there are some contrarians who believe that using a credit card can sometimes be the best way to go. Their advice is to use that plastic judiciously so it works to your advantage.

A good example is using a credit card for big-ticket items or when ordering online. If you’re unhappy with the product or with the way the transaction was handled, the credit card company will go to bat for you. The card company can put the charge on hold or even wipe it out entirely, depending on the circumstances. Also, with many companies, especially car rental firms and most online merchants, credit cards are often the only way to pay. Using a credit card when you’re traveling overseas may cost more because of currency conversion fees tagged onto charges, but it’s far safer than carrying cash.

Your credit card statement can also be a budgeting tool. Most card companies separate charges into categories, like fuel or groceries. That makes it easier to keep track of where your money goes and to spot areas where you may be able to cut back. And, of course, there are the rewards programs. These are best if you pay your bill in full every month. Otherwise, interest payments can negate the value of whatever goodies you get with the rewards points you pile up.