The usual personal finance advice tells people to avoid credit cards like the plague.
The reason for that is quite straightforward. Credit cards make it incredibly easy to get into debt trouble. When you use a credit card, you’re not directly spending your own money, and that abstraction is often enough to convince people to spend without thinking. After all, you don’t have to have the money in your checking account to cover it right now, do you?
I’m speaking from experience here. At one point in 2005, I had credit card debt that went well into the five figures while barely having enough to cover the bills in my checking account. One of the biggest reasons for this was the ease of using the credit card whenever I wanted something.
So why would I suggest actually using a credit card to pay for an expensive emergency like a car repair?
First of all, just because you use a credit card doesn’t mean you shouldn’t pay it off immediately. I use a credit card now for convenience, not because I don’t have the money in my checking or savings account to pay for the item. In fact, I’d go so far as to say that it’s not a good idea to use your credit card unless you do have the cash on hand to cover whatever you’re buying.
Credit cards are a tool of convenience, not something that enables an unsustainable lifestyle.
At the same time, however, credit cards do offer some additional protection against fraud and bogus repairs. For example, Mastercard offers several types of shopping protection that certainly cover a car repair bill, as does Visa.
I try to use my credit card for significant purchases like these so that if something goes wrong, I simply have another line of defense to protect myself against bogus practices.
One key step, though, is to know what protection your card specifically offers. The most effective way of doing this is reading through the terms of service on your card, though a more convenient way is to call the credit card company and ask them about the protections they offer for a car repair. Often, their basic protections will protect you against lemon repairs (though no protection is perfect and you might still find that something fails three years later and you have no recourse).
I have actually used this once, on a Visa card a few years ago. I had a repair done to the brake pads on my truck and the work was shoddy (I got the work done at an out-of-town shop because I was traveling). The first thing I did wasn’t to call the repair place, it was to call Visa. They told me exactly what to do, starting with contacting the repair place directly and calling them back if the repair place didn’t cooperate. They towed my vehicle, repaired the problem, and sent me on my way without an additional dime paid.
As always, pay off your bill in full each month. Using your credit card to pay for a repair doesn’t mean it’s a good idea to carry a balance on that card. Pay it off in full and don’t let a balance carry over unless you want to see your money start to vanish.
This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere.