Author: Sara Rathner / Source: The Motley Fool
Credit card debt is easy to rack up and hard to pay off, which can scare off a lot of potential users. Perhaps influenced by friends’ horror stories, only a third of adults under 30 even have a credit card.
But if you use them responsibly by only charging what you can afford to pay for completely when your bill is due, credit cards become a useful tool. Besides the possibility of rewards points, you get consumer protection from your credit card issuer. Think of it as an extra insurance policy when things go wrong.
What’s offered by each credit card varies, so read the fine print when you apply for a card. But in many cases, your card can help get you out of an expensive bind. Here are some common scenarios.
Your card gets lost or stolen
Say your latest credit card statement shows that someone’s been living it up at your expense. If it’s not your kid ordering toys through your Amazon Echo, odds are high that a fraudster gained access to your credit card information.
If your credit card itself was stolen, report the theft as soon as possible. At most, you’ll be liable for $50 in unauthorized charges, but many credit cards will refund the full amount immediately.
Debit cards don’t offer the same protections. If you report the theft before any charges are made, you won’t be liable for them. You’ll be liable for $50 if you wait two business days to report and $500 if you wait up to 60 days. Wait any longer, and you could lose all the money in the account. It can take weeks for your money to be deposited back into your account while the bank investigates your case.
One of the best defenses against credit card fraud is to be careful when shopping online. Make sure the retailer’s Web address begins with https://, which means the site has security measures in place to protect customers. If your credit card is stolen, or you suspect your card number has been compromised, report it to your credit card issuer immediately. And before you pay your credit card bill, look through each charge on the statement to make sure there are no fraudulent charges.
When good purchases go bad
You cut the tags off that new jacket, only to later decide it wasn’t what you really wanted. Now the store won’t take it back, and you’re out of luck. Or are you?
Many major credit cards will refund the cost of like-new items that retailers won’t let you return. Different cards offer varying levels of coverage, usually for up to 60-90 days after purchase.
For example, American Express cards cover items for 90 days from the purchase date and will refund up to $1,000 per purchase for up to $50,000 per year (that coverage increases to $10,000 per purchase for more elite cards, like their Platinum and Gold cards). The Chase Sapphire Preferred card covers you for up to 90 days as well, reimbursing up to $500 per item for up to $1,000 per year.
Credit cards also offer protection in case an item is damaged or stolen within 90 days of…
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