When plastic is prudent: Four smart credit card purchases

As the Bank of Canada interest rate continues on its trend of modest increases, financial analysts are raising alarms about growing levels of debt nationally. Credit cards, with their higher rates of interest and easy availability, are a source of one of the most alarming growth areas for consumer debt, say analysts.

But not all credit card use is imprudent, of course. There are benefits to paying with credit if you use your cards wisely. Depending on what you’re buying, using a credit card can earn you special discounts, rewards or added protection for your purchases.

Here are just a few purchases that you may be better off making with plastic.

1.Online Shopping

Online shopping is convenient — particularly in rural areas where there are fewer bricks-and-mortar stores — but it also comes with risks. Credit cards can help with this. Credit card issuers typically offer some type of fraud or identity theft protection if your information is stolen. When shopping online, paying with a credit card is one of the safest ways to go.

2.Travel Plans

When it comes to booking a flight, making hotel reservations or reserving a rental car, credit cards offer a number of advantages. Many card issuers provide perks like travel insurance, trip cancellation service, emergency services, medical assistance and rental car insurance at no additional charge.

If your credit card offers benefits like cash back and travel rewards, you could also be earning points towards your next vacation by paying for the one you’re currently taking!

3.Tax-Deductible Expenses

Tax deductible expenses can provide a nice break on your annual return, but keeping track of records for the CRA can be a major time burglar. Using a credit card to pay for deductible expenses such as business expenses, charitable donations, health care expenses, childcare expenses and qualified education expenses, can be a helpful method of record keeping. Be sure you hold on to your statements each month so you’ll have the records you need at tax time.

4.Major household purchases

Got your eye on a new stainless-steel fridge with all the bells and whistles? Is time to update your furniture-sized TV with the rabbit ears? Then paying by credit card can be a smart choice. Many credit card issuers now offer complimentary extended warranty programs for your purchases. Programs vary in terms of coverage and length, but generally, they can be used to repair or replace an item if it’s damaged. Some credit card companies even offer purchase protection, which covers loss and theft, and price matching for the things you buy.

Knowing what you should or shouldn’t buy with credit cards can help you get the most out of your card in the long run. But if you’re spending money you don’t have on credit, the cost almost always outweighs the rewards.