7 situations that call for a credit card

Assorted credit cards

Cash is king, except when it's not.

There are some shopping situations when it’s in your best interest to pay with plastic over check, debit or even cash.

Here are seven purchases for which you should always pull out a credit card.

Online shopping

Shopping on the Internet, especially while doing it on an unsecure network, can put your personal information and bank account at risk.

If that information gets into the wrong hands, you could easily open your checking account one day and see a balance of zero.

Cheryl Sherrard, director of financial planning at asset management firm Rinehart & Associates in Charlotte, N.C., says using a credit card online is safer than using a debit card or PayPal account.

"Even if you use a credit card and see fraudulent purchases on your statement, most cards ensure that you aren’t held accountable for them," she says.

For debit cards, there are protections that limit liability, but that doesn't eliminate the hassle of at least temporarily losing money.

Big-ticket items

When buying pricey objects like appliances and electronics, turn to plastic.

"You get breathing room, just in case the product is defective or doesn’t work as you expected, to return it before you make a payment on it," Sherrard says.

If you can’t return or exchange the item, you can contact your card company to dispute the charge and get it taken off your statement until the matter is worked out between you and the store. Also, some cards offer "purchase protection" insurance and extended warranties beyond what the manufacturer offers.

Sherrard says this rule also applies to antiques, artwork and other large or fragile items that could shatter, break or suffer major damage with just one clumsy move.

Using credit cards to buy them gives you added security if the purchase is damaged -- either en route or after it’s in place -- usually within 90 days. The purchase protection insurance will cover the damage by repairing or replacing the item or reimbursing you for the cost.

Buy-now, deliver-later items

You purchase something lovely in a store and plan to pick it up or have it delivered at a later date. That’s convenient, but sometimes things don’t go according to plan, and that lovely item never gets to you.

Charging that purchase gives the right to dispute and fraud protection that cash and debit cards do not.

Purchases with advance or required deposits

Say you want to rent a moving van to haul your stuff to your new home. Or you’re planning a big vacation. Chances are, you’ll be required to put down a deposit before the event happens.

Some companies require security deposits or advance deposits before doing business with you.

Credit cards are ideal for these purchase types.

With security deposits, the money is refunded, or the hold is taken off your card, once you’ve completed the transaction. With a debit card, you run the risk of having that money withdrawn even if there’s not enough in your account to cover it, triggering costly overdraft fees.

With advance deposits, a part of the total payment is taken up front, with the final payment due later.

But say the travel outfitter promising you the trip of a lifetime goes under, or you can’t go after all. There’s no guarantee the company will refund you that deposit.

As with big-ticket items, you can contact your card issuer and dispute the charge, getting it taken off your statement.

Even if you use cash or check for your final payment, using the card for the security deposit makes sense.

Airplane tickets

There are two main reasons to use a credit card for booking your plane seats. The first is travel insurance protection, says Christopher Elliott, travel columnist and the reader advocate for National Geographic Traveler.

Card issuers might go above and beyond what the airline will cover, such as refunds for canceled flights, coverage for lost or damaged bags, and emergency services.

"The offerings vary by card, and you may still need to buy travel insurance to fully cover all worst-case scenarios," says Elliott, but still, using the card makes sense.

Second is the free airline miles you’ll gain. Definitely use credit if it’s attached to a frequent-flyer program.

Nearly every airline offers one, and there are also credit cards that let you earn miles to use on any airline.

Hotel and car rental reservations

When you want to rent a car or stay in a hotel, you'll almost certainly have an easier time if you use a credit card.

"While they’ll take cash for a final payment, a credit card is almost always required for a security deposit," Elliott says.

Rental car companies and hotels want customers to pay with those because it can be easier to charge them for any damage they cause.

If you use a debit card, the company might insist on putting a hold of several hundred dollars on your account.

"Even if a car rental company will rent to you without a credit card, it’s not unheard of for the holds to run up to $500 and take as long as two weeks to drop off your account," Elliott says.

It’s even harder with debit cards when traveling overseas. In foreign countries, merchants won't always accept it as payment, even if the debit card is from a major bank.

Besides avoiding those hassles, credit cards can give you travel perks that debit cards can’t.

Many hotel chains like Starwood, Marriott and Hilton have credit cards that offer discounts and perks for the hotel guests who use them for stays.

Jobs done by independent service providers

Planning to make some home renovations? There are plenty of stories of homeowners who paid by check to get the house of their dreams and instead had nightmare dealings with contractors who left them high and dry with faulty or unfinished projects.

Anytime you're paying a hefty fee for a major project, it’s smart to use a credit card instead of paying by check, cash or debit card.

A credit card offers you protection if you’re ultimately unhappy with the results.

Even with a signed contract in hand, you might have a hard time disputing the job if you paid by cash. The only recourse you might have is taking the service provider to court.

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