If you’re like most people, you probably think of your credit cards as little slivers of evil living in your wallet, gobbling up all your innocent, hard-earned money. Credit cards, along with the companies that issue them, have a nasty reputation these days, which isn’t unfounded. People mostly focus on the downsides of credit cards—outrageous fees, arbitrary interest rates, and huge balances—but credit cards actually do a lot more than just allow us to make purchases without cash. For people who manage their money well, there are also many great benefits of paying by card.
Basic Benefits and Rewards Returns
Credit cards have a varying assortment of perks and benefits, depending on the card’s annual fee and the income and creditworthiness of the holder. For customers with a basic Visa or MasterCard, the main offering is protection against fraud. If the card is lost or stolen, the holder is never responsible for fraudulent or unauthorized purchases. It’s not necessary to buy any additional “fraud protector” services to get this benefit; it’s a part of every card member agreement. Even debit cards with the Visa or MasterCard logo are eligible for the liability protection, as long as they’re processed as a credit card. Transactions using a PIN are treated as cash. In an emergency, basic credit cards can also be used as alternate sources of cash.
When you upgrade to a “preferred” or “rewards” credit card, the benefits increase dramatically. Besides protection against fraud, they extend the manufacturer’s warranty on anything you buy with the card, doubling the original period of protection for up to a year. Visa also offers replacement service for any item that’s lost or stolen within ninety days of the purchase date. Rewards cards offer an array of incentive services, such as points to put towards gift cards, cash back programs, or airline miles.
Using a rewards card like American Express or Visa Signature really comes in handy for frequent travelers. It can’t make the plane leave on time, but it does automatically insure your luggage in case it gets lost or stolen and it provides accident insurance while you’re away. When renting a car with a rewards card, it’s not necessary to buy the collision damage waiver, because the card already covers you in case of an accident. The company will also provide roadside assistance when you’re traveling, like arranging for a tow truck or offering whatever other help you may need in case of an emergency.
American Express guarantees their card members rooms at certain hotels, and Gold and Platinum MasterCards offer automatic insurance for your belongings in case your hotel or motel room is burglarized. The only caveat is that if you want to take advantage of your card’s travel program, it’s important to make your arrangements directly with the hotel or airline, because buying through an internet discounter like Expedia or Travelocity usually nullifies the agreement.
For those who don’t mind paying higher annual fees and use their cards regularly, “Elite” or “Prestige” cards act as a personal concierge service. In addition to all the purchasing and travel benefits, cardholders get preferred reservations at restaurants all over the country and advance tickets to concerts and events when they pay by card, simply by making their arrangements through the special cardholder hotline. With a Platinum AmEx, the holder (and companions) can use any airport lounge in the world without charge, and when they use the card to buy a first- or business-class airplane ticket, the card supplies a companion ticket free. Cardholders also have access to a special hotline for emergency medical service. American Express will transport injured cardholders and their families from anywhere in the world to an accredited hospital. Visa Signature cardholders receive significant discounts at certain retailers and hotels. Elite cards also come with round-the-clock concierge service for just about anything else the cardholder might need, from help arranging travel to assistance picking out a gift.
Going even beyond the level of elite, the invitation-only cards available to the mega-rich offer incredible incentives. The American Express Centurion card (a.k.a. the “Black” card) charges a $2,500 annual fee and requires holders to spend a quarter-million dollars on the card every year, but it offers luxurious benefits like free nights at exclusive hotels, automatic airline upgrades, and access to private jet rentals when first class just isn’t good enough. Other companies have tried to release their own versions of the Centurion card, and they all offer complimentary concierge service as well as preferred access to cruises, vacation rentals, celebrity events, and more generous airline miles and reward point programs.
Reaping the Rewards
With the exception of the basic services, not all perks are offered on all cards, so it’s important to check the terms of service on yours before you count on having that roadside assistance or rental car insurance. The exact terms of service vary from card to card, depending on the holder’s creditworthiness and the bank that issued it. In general, business cards usually don’t have the same benefits as personal cards, and charge cards (like American Express or Diners) usually offer better benefits than credit cards (like Visa and MasterCard). The difference between the two is that charge cards must be paid in full every month, and credit cards can carry a balance.
You don’t have to pay for a card that offers outrageous perks like private jets and concierge service to feel rewarded. Few customers will ever need an emergency medical evacuation or the assistance of a personal shopper, so credit cards that offer discounts at favorite merchants, those that offer cash back options, reward points, or airline miles are great choices for most people. Of course, all these outrageous offerings are only tools to get you to spend more money, so make sure that by racking up all your awesome rewards, you’re not also racking up a mountain of debt.