Ever wondered why it pays to use plastic?
Using a credit card can be scary. Every few months there’s a new hack in the news and millions of shoppers get their personal information, including their credit card numbers, stolen. A “2014 Identity Fraud Repot” by Javelin Strategy & Research said that in 2013 alone, debit and credit card fraud cost a collective $11 billion dollars. The same report says that in 2013, 8 percent of consumers were affected by credit card fraud. Between taking time off work, notarizing documents, and legal fees, the incidents cost them an average of $106.
Credit card issuers like Visa, American Express, and MasterCard make their money every time you swipe though, and they’ll include plenty of perks with your card to make sure you keep using it. That’s one of the reasons so many cards let you earn points, miles, or cash back for every dollar you spend. However, those rewards programs are only a small portion of why it pays to use plastic.
The following are some of the most common benefits you’ll have access to by using a credit card for your purchases. To be eligible, you need to make the entire purchase using the credit card (you can’t pay partially with cash, a gift card, or a different credit card), and benefits may vary depending on the card you use.
Cards with an annual fee often have the best perks. Visa and MasterCard also have different tiers within their programs, such as Visa Signature and MasterCard World and World Elite. The same credit card may be issued in a different tier depending on the applicant’s credit score, and the benefits and annual fee will change depending on the tier issued. For example, World MasterCard cards offer price protection for 120 days versus the standard 60 (more about that later). Coverage limits for specific benefits, such as the amount of insurance included or maximum reimbursements allowed, also change depending on tier.
1. Zero Liability
An important benefit to keep in mind: just about every credit card now offers zero liability protection. Federal law mandates that the maximum liability to cardholders is $50, but, in most cases, if someone else steals your information or card and uses it to make an unauthorized purchase you won’t have to pay a single dime!
Debit cards also have zero liability protection by law, but only if you report the incident within two business days (which isn’t always possible if you didn’t realize your information was stolen online.) After the two-day grace period you’re liable for $50 in unauthorized charges. That climbs to $500 worth of charges if you make a report within 60 days, and “unlimited” liability after that.
2. Purchase Protection
Many credit cards come with a great benefit that can ease your stress when making big purchases. If your item is stolen or damaged they’ll replace, repair, or reimburse you for your loss at no extra cost! Sometimes you can even get reimbursed if there’s an item the store won’t accept for a return. Coverage typically lasts for 90 days from the day of purchase.
3. Extended Warranties
If you’re buying a large appliance or electronics the standard advice is to turn down the additional warranty, but what if you want the extra protection? Even if you turn down the extra coverage, credit cards double the manufacturer’s warranty – up to one year of additional coverage – if you pay for the product in full with the card.
4. Price Protection
Ever put off a purchase because you were scared the price was going to drop next week? Cards from specific issuers, like Chase and Citi, now offer price protection. This feature allows you to get a refund if the item’s price drops within 60-90 days of purchase. Read the fine print though. Sometimes you need to register a purchase for it to be eligible.
5. Luxury Hotel Programs
The higher-tiered cards often grant access to luxury hotel and resort programs. The price for the room remains the same, but you receive extra benefits like early check-in and -out, room upgrades, free breakfasts, and spa or restaurant credits.
6. Travel Insurance
Travel insurance comes in several forms. First, the cost of the trip for you and your family may be refunded if your trip is cancelled or interrupted. Second, although gruesome, the card issuer will pay out if there’s an accidental death or dismemberment while you’re traveling. Third, travel insurance reimburses travelers in case your bags are lost or delayed.
7. Rental Car Collision Damage Waivers
Every rental car agency will try to upsell you added insurance coverage when you’re renting a car, but if you pay in full with a credit card you can turn down the collision damage waiver (CDW). This covers you if your rental car is damaged or stolen, although if you have standard car insurance you must use your own insurance before the credit card’s coverage kicks in. (In technical terms, your insurance is primary and the credit card’s is secondary).
A notable alternative is if you have an American Express card. Once you enroll in the Premium Car Rental Protection program you play a flat rate of $24.95 ($17.95 for California residents) per rental, and you receive primary insurance to cover damage or theft of the rental car, and secondary insurance coverage for theft of your belongings and injury to you or a passenger. Similar options from the rental companies can cost as much per day.
Even with a CDW waiver and the Amex service you’re not covered for liabilities – damage to other people or property. Your standard car insurance must include some coverage by law (limits vary by state), but if you want to guarantee or increase coverage you’ll need to pay the daily rate to the rental car company.
8. Roadside Assistance
Although you’ll still have to pay service fees, credit cards offer 24-hour roadside assistance, and after a quick call they’ll send you help if you need a tow, jump, fuel, or tire change.
9. Travel Concierge and Assistance
Concierge service can help you find and make a reservation at a well-rated restaurant, buy and even deliver gifts, and get you into special events. If you’re planning a trip, the travel assistants can also help explain visa and immunization requirements for your travels, help with misplaced or stolen bags, and recommend professional services, such as doctors and lawyers, when you’re in a foreign country.
10. Early Access
Similar to a concierge service, each of the big three credit card networks have their own entertainment portals where cardholders get access to pre-sale tickets for popular shows, concerts, and sporting events. Sometimes you may even be able to get access to special events, like the Tony Awards, and Visa Signature cards get you free wine tastings at many wineries in Sonoma County, California.
11. Special Offers
In addition to the points and miles you can earn with many credit cards, American Express and Visa have other money-saving “offers.” These include free shipping, coupon codes, and special deals like $30 back after spending $100 at a select store. The cash-back offers are exceptionally beneficial because you stack them on top of other discounts and coupons.
12. Free Credit Scores
Although not yet as widespread as other benefits, many credit cards now let you see your FICO credit score from one of the three bureaus, Experian, TransUnion, or Equifax. This feature is provided by the issuer rather than the network. In other words, it’s available to people with credit cards form Citi, Barclay’s, and USAA, but not necessarily everyone with a Visa or MasterCard.
Benefits and terms vary depending on your card so be sure to check to see which of the above apply to you. If a particular benefit catches your eye but you don’t have it, it may make sense to apply for a new card. Even cards with an annual fee can “pay for themselves” if you take advantage of all the perks.