It may seem we are always preaching to our readers not to use credit cards. The reason being, if you are visiting our site, chances are you have way too much debt and/or your credit is bad and you are looking for ways to straighten out your finances. So, using a credit card is probably the last thing you want to do in a situation such as this.
But, there are times when you absolutely need a credit card — for no fault of your own — some transactions require the use of a credit card. It is during these times you will need access to a credit card, so having one for just these types of emergencies might be a good idea.
Renting a Car
If you have done any traveling lately, chances are you rented a car while at your destination. Then you already know the rental car agencies practically want your firstborn before they will rent you a car. While it may be possible to rent a car without a major credit card, it is very difficult. Rental car companies will require a deposit, several forms of identification, and proof of insurance.
Debit cards will not work when renting a car. The reason being, the rental car company puts a large hold on your card to cover any expenses – and debit cards are not capable of handling this type of hold. If you do not have a credit card, or maybe you can not qualify for one, the next best thing to get is a secured card. Make sure to get a secured card with a sizable limit, of say up to $2,000, if you are planning to use it for renting a car.
Checking Into a Hotel
Similar to rental car agencies, most hotels require a credit card to make a reservation and then they require a credit card when you actually check in to the hotel. Without a credit card, you will need to place a deposit on your room in order to ensure against damages and to cover any incidental expenses. These deposits are often made as a hold on a debit card, which can take several days to clear. If you are planning to visit multiple hotels within a week, these holds can add up to over a thousand dollars. Putting a bit of a damper on your travel plans if you don’t have enough money in your banking account to cover these holds.
Buying Something From an Unfamiliar Seller
Let’s say you are going to buy something from a business or person you do not know. A feature that credit cardholders enjoy is the ability to request a “chargeback” in the event that goods or services paid for are not provided. If you pay for merchandise with a credit card, you can quickly have the charges reversed if you are dealing with an unscrupulous merchant or a company that has gone out of business. If you pay this person with cash, your only recourse is to take them to small claims court and that can be very costly.
When pursuing a chargeback, the merchant must then submit documentation supporting their claim in order to make the refund permanent. And since excessive chargebacks are extremely costly to retailers, just the threat of a chargeback is often enough to convince many companies to stop fighting you and do the right thing – refund your money.
During an Emergency
Disaster can strike at any time and it usually happens when you are on vacation. Let’s say you and your family are taking that vacation to the Grand Canyon and your car breaks down halfway there. You will need a credit card for any repairs to your car and use it to pay for a hotel room while your car is being fixed.
Even better, if you used a credit card to say, book your airline tickets, and you encounter a travel disruption, chances are the card you used comes with travel insurance or a concierge service. This could be very useful in the event of a personal crisis or natural disaster.
When You Are Robbed
If you have your wallet or purse stolen, not only will the thief get all the cash you had on hand, they will also have access to your credit cards. Unfortunately, the cash is long gone but if the thief tries to buy something with your card, you will not be responsible for this charge.
By federal law, cardholders are not liable for unauthorized transactions in excess of $50, but actually, rarely do cardholders have to pay for any charges made using a stolen credit card. You must notify the credit card company immediately of the theft so they can close your account and put a theft warning on it. This way, you will not be held responsible for any fraudulent charges and they just might catch the thief.
Having and using a credit card is not always bad – you just have to know when to use it. There may be times in your life when you absolutely have to use a credit card, so having one handy could be the difference between staying in that nice hotel or staying in the bed-bug-infested one down the road. You should have a credit card handy just for these types of uses and one that has a decent credit limit on it. Just make sure to resist the temptation to use this card for frivolous purchases and racking up the balance – then it will be no good to use when you really need it.