There are some expenses you should cover with cash and some that should be left for your debit card. What about your credit card? Of course, there are specific expenses that you should always cover with your credit card! Find out exactly what those are.
Whenever you’re booking a room at a hotel, you should use your credit card. Your credit card can cover the cost of the room, along with the security deposit.
Hotels often charge guests a security deposit for each night of their stay. This security deposit is a form of insurance that the hotel uses to make sure guests pay for incidental expenses by the time they officially check out. Those incidentals could be room service orders, mini-bar snacks or movie purchases. The security deposit can also cover damages made to the room. Any of these additional expenses will be subtracted from the security deposit at check-out and the remainder will be returned to the guest. If none of these extra expenses are made, the guest will get the entire deposit back.
Typically, hotels will ask for $50-$200 per night for security deposits. This can quickly add up. If you’re staying in the same hotel room for a week, you could be spending $1400 on security deposits alone. This is the reason why you should use a credit card.
With a credit card, you’ll likely have enough available credit to cover such a substantial expense for a small amount of time. The hotel will only charge the expense as a “hold” on your credit card — it won’t necessarily go through to your next billing cycle. Once you’ve checked out, the hotel will return your deposit (or what remains of it) to your credit card, giving you access to that credit all over again.
If you use a debit card to book your hotel stay, the hotel will have to take the money for the security deposit out of your account. Once you’ve checked out, the hotel will have to transfer that money (or the remainder) back to your account. And even then, you still won’t have access to your funds. A wire transfer between the hotel and your bank can take days to process.
Do you have to buy a computer? A smartphone? A top-of-the-line microwave? Then, you should use your credit card for the purchase. Your credit card provider might offer extended warranties for electronics.
An extended warranty will increase the coverage of the product’s original manufacturer’s warranty. A manufacturer’s warranty grants the buyer coverage for any repairs and replacements needed for the product because of manufacturing defects. It will not cover repairs and replacements needed because of accidental damage, like water damage.
How long will the extended warranty last? Typically, credit cards offer an additional year of coverage to the manufacturer’s warranty. So, if you want to purchase a laptop with a one-year warranty, your credit card could double your coverage and push that warranty to two years.
Check your card’s policy to see whether it offers this benefit and what its terms are.
Sometimes, you don’t have enough savings to cover an emergency expense. This is when your credit card can come in handy. As long as you have enough available credit, you can charge the emergency expense to your credit card as soon as possible. This allows you to resolve the urgent problem, even when you can’t afford it.
Ideally, you can pay off the expense on your credit card before the next billing cycle begins — this will help you avoid accumulating interest on the transaction. If you can’t do that, you can slowly pay down the balance over time.
A credit card isn’t your only borrowing option in an emergency. There are plenty of other flexible borrowing options available online (as long as you meet the eligibility requirements). One of these options is a personal line of credit loan. With an approved personal line of credit loan, you could request a withdrawal within your set limit and then use that withdrawal to handle the emergency in a short amount of time. Then all you have to do is follow a repayment plan.
These are some of the best times to put an expense on credit. Put that debit card back into your wallet!
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