5 Ways Credit Cards Can Make You Happy

The ways that credit cards can make you unhappy are legion. Fees, balances, crazy interest rates, universal default, the list goes on. But, even though we just saw Bank of America digging a pit in your backyard, and word has it the zoo is missing 3 tigers and a crocodile, there are a few ways that a credit card can make you happy. (Not all of these tips are unique to credit cards, so check to see which benefits your debit card has.)

In order to properly enjoy these tips you have to:

  • Enjoy budgeting money.
  • Be naturally responsible with money.
  • Have a job.
  • Spend less than you earn.
  • Pay your credit card on time.
  • Realize that not all cards are the name, and take the time to find one that has the benefits you want.

If that sounds like you, let’s take a look:

1) Cash Back: Some cards offer “rewards,” but we think those programs are better at convincing you to spend money than they are at actually giving you the rewards. We like cash back cards. You spend money. You get some back. It makes you happy.

2) Insurance: If you credit card offers rental car insurance you can say, “No thank you” to the rental car agent when he or she asks if you’d like to purchase insurance. In fact, you should do this, because accepting the rental car insurance may void your credit card insurance. (Some debit cards may also offer this sort of protection, so don’t assume that yours doesn’t and run out and get a credit card just for this reason.) If your card carries this benefit, don’t forget about it, or you’ll be sad. Your card may also offer roadside assistance without you even knowing about it. Will you remember this when you’re stuck on the side of the road?

3) Arbitrage: Some people really like doing this. Personally, we would screw it up and don’t recommend it, but it is a demonstrable fact that there are people who are benefiting from this tactic. So who are we to judge? It makes them happy. (We still think you shouldn’t do it.)

4) Fraud Protection: It might be due to the differences between how credit and debit fraud is handled, but most of the horror stories we hear are from people dealing with bank account/debit card fraud. Credit card fraud departments seem to have their act together when compared to a bank’s fraud department. This is just an observation, but we do read an awful lot of complaints. Take it for what it’s worth.

5) Extended Warranty Protection: If you buy a lot of expensive electronics, get a credit card with extended warranty protection. If you do this, you’ll be able to say “get lost” to the blue shirt who is trying to sell you an expensive warranty. Don’t believe us? We helped one of our readers get his laptop replaced by AMEX. He sure seemed happy.

We know a lot of our readers use credit cards. Why do you bother with them when so many “personal finance gurus” tell you you’re crazy? Let us know in the comments.

(Photo:jgodsey)

Comments

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  1. godai says:

    “Realize that not all cards are the name, and take the time to find one that has the benefits you want.”

    And lo that name was Mastercharge.

    There’s an old radio play called J.A.P.

    “And what was Judy Anne Pearlman’s first words?”
    “Goo goo gah….. Master charge.”

  2. JRuiz47 says:

    This article got me thinking. I just opened a new checking account with Capital One and read through the extras on the Platinum MC Debit Card; it looks as though you get some extended warranty on purchases made with the card.

  3. stopshopping says:

    As a responsible business and homeowner the power of credit cards as an instant lender has been invaluable. Over a few years we have borrowed tens of thousands of dollars nearly interest free, and at worst, several points below market interest rates. Now we have multiple options for financing and leveraging on major purchases and cash flow. WARNING – this is not advisable for everyone! Mess up once and it can all come crashing down. I just wanted to point out how their aggressive lending can be used in the consumers’ favor if you play it right.

  4. ChrisC1234 says:

    I thought credit cards made you happy because you could get instant gratification, buying that expensive HDTV that you really can’t afford.

    Anyway, watch out with the rental car insurance. I rented a car with my Discover card, and a piece of flying road debris put a massive crack in the windshield (and I’m talking stretched from the top to the bottom). Discover’s “insurance” will only pay up and over what YOUR insurance will not pay, and will not pay for the deductible either. As it turned out, the new windshield was $15 over my deductible, so the rental company let me pay it rather than have it go on my insurance. I was pretty pissed that Discover wouldn’t cover it though.

  5. stopshopping says:

    PS – American Express crditing the Apple iphone price difference was a great example of the accessory benefits.

  6. micahd says:

    I really appreciate that you started this post with the six very important factors before going into how credit cards can be beneficial. I will never use a credit card, but I can see that if a person meets those requirements, you could do so safely.

  7. King of the Wild Frontier says:

    They forgot a couple:

    - Emergency ice scraper (warning: this may ruin the magnetic stripe)

    - Opener of crappy locks (ditto)

    - Chopping up crystallized drugs for enhanced snortability (never done myself, honest, but I seen it done on the TV)

    - The edge could potentially be sharpened into a deadly weapon, although that would really do a number on your wallet, wouldn’t it?

    - Keeps your cash, social security card, condom company

  8. FLConsumer says:

    Don’t forget that this buys you an extra month of interest on your savings before it’s spent. That plus cash back can mean some decent money.

    For example, I had my air conditioning system replaced in May. The final bill was close to $10,000. So, for an extra month, I was able to keep that $10k in my investment portfolio (been averaging ~18% on it), plus I got an additional 1.5% cash back from the credit card. $10,000 * ~18%/12 months = $150, $10,000* 1.5% = $150, so I saved $300 by doing it this way. Admittedly, not a huge amount, but it all adds up.

    Another great use for credit cards — company reimbursables! Charge it up, resubmit the bills to AR, get a check a week later. In the meantime, I’m not out any money and I’m collecting the cash back + skymiles on it. Not a bad deal.

  9. We use credit cards for virtually all purchases because of the cash back and because of the “float” where you get to earn interest on your money longer while it sits in your savings account until the bill comes. I ONLY used mine for online shopping (or car rental, or hotel reservations) before I got married, but my husband “made” me start using the credit card for everything because he was adamant that it made more sense in terms of earning interest on the money that got to sit in your savings account a little longer and in terms of cash back.

    I was reluctant at first, but it actually works really well for us. It helps me with keeping a running budget during the month (I typically calculate out my budget at the END of each month, but checking the CC bill online when ALL purchases are on it is very helpful). We always pay off each month, and we do get some real nice cash-back rewards.

    I still like to pay for big-ticket items with a check, but these days I find more and more often I want to charge the big-ticket item, get the points, and send the check directly to the CC company the next morning.

    As a general rule neither of us is given to impulse purchases. I tend to agonize for AGES over even very small purchasing decisions, so my impulse purchases run to People Magazine in the checkout line at the supermarket as my reward for surviving the supermarket. His impulse purchases consist almost entirely of previously-viewed $5 movies at Blockbuster. If we had a tendency to impulse purchases I think credit cards would probably be a TERRIBLE way to manage our money. :)

  10. jamesdenver says:

    Miles Miles Miles. I have the UAL visa and in 2 years usually end up with a free ticket, 1 year if I need big ticket stuff like new furnace or major car repairs.

    I pay it off each month, and WISH I could charge my monthly mortgage in order to get more miles.

  11. xamarshahx says:

    AMEX Clear and Schwab seem to have pretty good features on their cards. Schwab offers price protection for 90 days while both offer insurance on products for 1 year past warranty, both also have a 1% rewards programs that just stays and doesn’t change every month so they can somehow screw you along with concierge service. Some cards start giving more points per dollar, but then triple the rates for prizes, these two cards have stayed stable. The Clear says it has no hidden fees and generally AMEX is known for taking care of problems with consumers, they also give a free credit report and assistance for identity theft every year.

  12. anatak says:

    Add to your disclaimer list:

    >Understand that there is an inherent risk to borrowing money and using credit cards.
    >Understand that consumers typically spend more when using plastic as opposed to cash.

  13. ChrisC1234 says:

    Oh yeah, I forgot about Discover’s “Get More” program. Every 3 months, there is a different category of purchases that can qualify for 5% cash back. During July – September, it was gas purchases (that’s appx $0.12 off per gallon). Oct – Dec it is movies and dining that get the 5%. The only drawback is you have to sign up for it at the beginning of the 3 month block.

  14. Max2068 says:

    One reason the fraud departments are probably better at the credit card companies is because of who has put out the money.

    For a debit card, you’ve already paid the money, and they have to fight for you to get it back. In this instance, if they can’t recover anything, it isn’t their loss.

    On the other hand, for a credit card company, it’s their money on the line since you wait till the end of a billing cycle to pay. They’re the ones who made the initial investment, and the ones who lose out if someone’s been running up bogus charges.

    The credit card companies have a lot more to lose monetarily, so it makes sense their fraud departments are likely to be a lot better.

  15. ihateauditions says:

    I used to be cash only. I started using a lot of credit when I tried to get really good with my money.

    With a credit card, I know exactly where all my money went, instead of having a mysterious ‘$2k/month’ line in my budget marked only ‘cash’.

  16. meeroom says:

    I really enjoy my Amex Blue. My husband and I put all of our business expenses,gas and groceries on it. So far in the first year we have $350.00 in the high-yield savings account attached to the card. We pay it off in full every month and have never paid a dime of interest.
    We had made the big credit mistakes when we were younger (over $40K on cards between us when we were in our twenties) but we dug ourselves out of it and now we use credit wisely.

  17. mrosedal says:

    Discover Cash awards!!!! That is where it is at. Of course I pay on time and in full every month. They often let you return your cash back for double rewards…I am getting 6 lobster tails from Lobstergram for $200 and pennies. I traded in $100 in cash and lobstergram doubled it. Since I don’t pay any interest on my Discover card I was essentially given $200 free like a Christmas present…that makes me happy :-)

  18. GenXCub says:

    For car rentals, I don’t know if it is sour grapes on their part, but every time I tell them that I will use Visa’s coverage, they let me know that most credit card-based coverage doesn’t cover fees that Rental Car agencies charge for the time that the car is not on the road (i.e. the potential rental income while it’s in the body shop)

  19. evixir says:

    Ditto on the Visa car rental coverage bit; I’ve used them exclusively now since I don’t own a car of my own (hence no car insurance to speak of). The rental car companies are NOT pleased that they’re not getting the extra $ for the Collision/Damage Waiver, though I still buy the personal accident coverage just in case, as Visa only covers CDW.

    Incidentally, after an irritating situation in which Alamo caused damage to one of their cars when parking it and accused me of causing it, the Visa folks were extremely helpful in assisting me and they covered the entire $450 bill. And at least I know never to rent from the crooks at Alamo again.

  20. Trackback says:

    My fiancée bought me Heroes: Season One on DVD a few weeks ago and it’s amazing. We’ve been watching an episode or four every few nights and basically need to pull ourselves away from watching all of them at once.

  21. FLConsumer says:

    @ihateauditions: Similar thing happened for me. Used to be a cash-only person. FAR easier to keep track of everything with the credit card & Quicken. I was able to cut my spending substantially with it.

    FWIW, here’s the CDW for my Visa Signature card. Not sure how this differs from the other Visa cards:

    What is covered?
    Subject to the terms and conditions in this Guide to Benefit, Visa Signature Auto Rental CDW reimburses you for covered damage or theft to a rental vehicle while it is your responsibility as well as valid administrative and loss-of-use charges imposed by the auto rental company and reasonable towing charges. Only vehicle rental
    periods that neither exceed nor are intended to exceed fifteen (15) consecutive days within your country of residence or thirty-one (31) consecutive days outside your country of residence are covered. The benefit provides reimbursement up to the actual cash value of the vehicle as it was originally manufactured. Most private passenger
    automobiles, minivans, and sport utility vehicles are eligible, but some restrictions may apply. Please contact the Benefit Administrator to
    inquire about a specific vehicle. Within your country of residence, this benefit supplements, and applies excess of, any valid and collectible insurance or reimbursement from any source. This means that, subject to the terms and conditions of this Guide to Benefit, Visa Signature Auto Rental CDW applies to losses or expenses that are not covered by insurance or reimbursement.

    Covered losses are:
    • Physical damage and/or theft of the covered rental vehicle.
    •Valid loss-of-use charges imposed and substantiated by the auto
    rental company through a fleet utilization log.
    • Reasonable and customary towing charges, due to a covered loss,
    to the nearest qualified repair facility.

    What is not covered?
    •Any obligation you assume under any agreement (other than the
    deductible under your personal auto policy).
    •Any violation of the auto rental agreement or this benefit.
    • Injury of anyone or damage to anything inside or outside the
    rental vehicle.
    • Loss or theft of personal belongings.
    • Personal liability.
    • Expenses assumed, waived, or paid by the rental agency or its insurer.
    •Cost of any insurance or collision damage waiver offered by or
    purchased through the auto rental company.
    • Depreciation of the rental vehicle caused by loss or damage including,
    but not limited to “diminished value.”
    • Expenses reimbursable by your insurer, employer, or
    employer’s insurance.
    • Loss due to intentional acts, or due to the driver(s) being under
    the influence of alcohol, intoxicants, or drugs, or due to contraband
    or illegal activities.
    •Wear and tear, gradual deterioration, or mechanical breakdown.
    • Items not installed by the original manufacturer.
    • Loss due to off-road operation of the rental vehicle.
    • Loss due to hostility of any kind (including, but not limited to, war,
    invasion, rebellion, or insurrection).
    •Confiscation by authorities.
    •Vehicles that do not meet the definition of covered vehicles.
    • Rental periods that either exceed or are intended to exceed fifteen
    (15) consecutive days within your country of residence or thirty-one
    (31) consecutive days outside your country of residence.
    • Leases and mini leases.
    • Loss or damage as a result of the cardholder’s lack of reasonable
    care in protecting the rental vehicle before and after damage occurs
    (for example, leaving the vehicle running and unattended).
    • Losses reported more than forty-five (45) days* from the date
    of loss.
    • Losses for which a claim form has not been received within ninety
    (90) days* from the date of loss.
    • Losses for which all required documentation has not been received
    within 365 days from the date of loss.
    • Losses from rental transactions which originated in Israel, Jamaica,
    the Republic of Ireland, or Northern Ireland.