The case for Credit Card usage
Anyone who owns a credit card knows how convenient they are. Plastic money is easy to carry around in your wallet, and it is convenient to use – just tap or swipe, and you’re done! When big ticket items need to be purchased, they often cost a lot – more than the cash you may have in your wallet or even perhaps your chequing account. Often, these items (like a Home Entertainment system, for instance) cost a quite a bit.
Since using cash or a debit card are out of the question, your alternate choices are limited. You may think that paying online, via a payment-processor like PayPal might be safer? Well, not really! With online payment fraud and identity theft on the rise, such services don’t offer you “real” protection.
So, what’s the alternate? The answer: When it comes to purchasing big ticket items, you’re much better off using a credit card. Here’s why:
- Personal Information Protection Plans: Most reputed credit card issuers are committed to the highest standards of identity and personal data protection. Their platforms are built around keeping all financial and personal information safe. If you feel your card has been compromised, one phone call can immediately cancel the card, ensuring the significant sum paid isn’t siphoned out of your account. That’s the peace of mind you experience from charging items to a credit card! Credit Cards like the BMO Rewards® MasterCard® offer you Zero Dollar Liability: protects you from unauthorized use of your credit card*.
- Credit Card Product Protection Plans: If you buy a piece of electronic, worth say, $20 or $50 cash, it’s not worth shelling out a further ten or fifteen bucks for extended warranty protection. However, more expensive and complex items, like a Tablet, PC, Notebook or Dishwasher, are a different ballgame altogether. It can be worth getting some form of “protection”. Many retail and financial institution credit cards offer automatic product protection that goes over and above the standard manufacturer-provided warranties. Paying for items via credit card gets you that additional safety net. Credit Cards like the BMO® CashBack® World Elite®* MasterCard®* or BMO® CashBack® MasterCard®* offer extended warranty on your purchases.
- Faster Accumulation of Rewards and Air Miles: You’ll need to buy a whole lot of shampoo and pet food with your credit card, before you accumulate any serious rewards, air miles, or cash back points. However, a single purchase of a big ticket item – like furniture or a television– can really rack up the reward points. The bigger the purchase value, the larger the amount of rewards or cash back. When you off-set those rewards against the cost of the item, it’s very likely that you’ll end up with a lower Total Cost of ownership – thanks to your use of a credit card! Credit Cards like the American Express® AIR MILES®* Platinum Credit Card * Credit Card below offer cardholders the ability to earn air miles quicker, with the ability to earn as much as 1 Air Mile per $10.
American Express® AIR MILES®* Platinum Credit Card ®
- Save on interest: If you manage your credit card payments wisely (more on this later!), paying for larger items using a credit card these days is like getting a short-term interest-free loan. It’s possible that you don’t have the entire purchase price in your bank account right now – though you are expecting funds to come in by the time your credit card statement is due (two or three weeks from today). So, between now and then, the credit card company is effectively funding your purchase – at no interest to you! Credit Cards like the American Express EssentialTM Credit Card below offer very low interest rate, allowing cardholders to enjoy a low 8.99% interest rate on purchases.
American Express EssentialTM
[NO LONGER PROMOTED]
- Price Protection: If you paid $5,000 for a new television and surround sound set with your debit card, chances are that $5K is what the final price will be. However, many credit cards today offer Price Protection insurance, if you can find the same item somewhere else, within a set period, for a lower price, the credit card issuer will refund the balance. This is a great opportunity to help with the risk of buyer’s remorse, especially on those big ticket items. Credit Cards like the Scotiabank®* Gold American Express® card below offer cardholders Price Protection Service, which covers most items purchased on the card are and will be protected in the event of a price drop within 60-days of purchase.
Scotiabank® Gold American Express®
Paying for Big Ticket items responsibly
As we can see, charging your Big-Ticket items to a credit card can make a lot of sense. It offers you security, privacy protection, consumer protection, and they can make those expensive items cheaper – after you factor in rewards and price protection benefits. However, you need to exercise some caution when charging really large purchases to your credit card:
- Credit counselors advise that you should never use up more than a certain percentage of your available credit – usually keep it below 30% to 40%. If a purchase goes beyond that, you may risk jeopardizing your credit score
- It goes without saying that large purchases could also mean BIG Interest payments – if you don’t pay-off your balance in full each month. So, charge those large items to your card, but please manage your payments responsibly!
- Finally, just as you would when charging other items to a credit card – from groceries and toiletries to books and plumbing supplies – you need to exercise caution on where (which retailer or online site) you are making your purchase from. If it is found that you did not exercise basic levels of diligence, your credit card issuer could refuse to provide you any of the five protections/benefits we’ve highlighted above
Of course, not every credit card is appropriate when it comes to charging various items to them. It might be a good idea to compare credit cards first, using such online comparison tools as are available at JustCompare.ca, before applying one that fits your big ticket purchase needs.
Compare Credit Cards
This information is just our view and should be not be considered advice of any sorts.
From our experience and other professionals we partner and engage with, we work to find useful tips and information that would be important to share.
If you are someone that is looking for professional advice tailored to your circumstance, please contact a bank, financial advisor, or mortgage broker.