Many people have awful stories about how they dug themselves into a massive hole of credit-card debt. However, while they’re dangerous for some people, credit cards can be beneficial for others.
Fortunately, I’ve always paid mine off in full, so I’ve been able to see the advantages of credit cards first-hand.
While at first I focused on the obvious perks, such as reward points and sign-up bonuses, I eventually realized that credit cards have much more to offer. Keep in mind that each card will have different benefits, so make sure to read the fine print to see what’s available to you.
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Here are just a few of the benefits that I discovered may come with a card with no annual fee:
Credit Card Benefits for Shoppers
Credit card companies want you to charge your purchases on their card, so they offer benefits that help protect your purchases. In order to qualify for these protections, you must put the purchase on your credit card.
1. Damage or Theft Protection
If an item you pay for with a card is damaged or stolen within a certain period of time — usually 60 to 120 days — credit card companies sometimes offer to repair or replace your purchase for free.
There are usually dollar limits per item and per year. My card offers up to $1,000 per item and $50,000 per year.
2. Extended Warranty
You can extend the manufacturer’s warranty if you put the purchase on a card with extended warranty coverage. Mine offers an extra 24 months. If the item breaks, the credit card company will repair it, replace it, or reimburse me up to $10,000 per item. Other cards usually offer to double the warranty if it's less than a year or add a year if the warranty is a year or longer.
3. Return Protection
Not all stores have return policies. If you try to return an item you paid for in full with your card and the company refuses the return, some credit cards will refund you the purchase price. Mine offers up to $300 per item and up to $1,000 per year.
Credit Card Benefits for Travellers
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Travel is another large purchase that credit card companies want to see on your statement. Here are a few benefits that may make that a good idea.
1. Car-Rental Insurance
Some credit cards offer car rental insurance if you use your card and decline the car rental company’s collision loss or damage insurance. For instance, my card offers up to $50,000 toward the cost of repairs or the cash value of the car (whichever is less) if you get in an accident or experience a theft involving your rental car.
Not all cards provide the coverage, so make sure that you have it and understand how it works before you decline the rental company’s insurance.
2. Trip Cancellation or Interruption Protection
If you’ve ever been on a trip that didn’t go as planned, you know you often end up paying for unexpected expenses. If you put the costs of your trip on a card, you can often recover nonrefundable expenses up to a certain amount for each traveler if your trip is cancelled or interrupted for a covered reason, such as sickness, injury, or severe weather. My card offers up to $3,000 for each traveler.
3. Roadside Assistance Dispatch
Many credit cards offer roadside assistance. My no-annual-fee card offers to dispatch help to my location within the United States as long as I agree to pay for the services provided, though higher-end cards may even pay for the service.
This is great if you’re stranded in an area and don’t know who to call for help.
4. Travel-Accident Insurance
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If there's a tragic accident on your trip on a common carrier — such as an airline, train, or cruise ship — and you paid for the fare in full on your card, you can receive compensation. My card offers up to $250,000.
Higher-End Cards May Have Better Benefits
Annual fees for higher-end credit cards can range from $95 to $450 (sometimes more). That said, these cards usually come with enhanced benefits, such as airline-fee and travel points that can add up to hundreds of dollars. Make sure to evaluate the credit card benefits before agreeing to an annual fee, as you’ll want to get more value than the yearly cost.