Protestants can use the term sacraments. What is important is to define the significance of baptism and the Lord’s Supper in an ongoing way.
Regarding use of the term “sacraments,” Grudem writes:
There is disagreement among Protestants even over the general term that should be applied to [baptism and the Lord’s Supper]. Because the Romans Catholic Church calls those two ceremonies “sacraments,” and because the Catholic Church teaches that these sacraments in themselves actually convey grace to people (without requiring faith from the persons participating in them), some Protestants (especially Baptists) have refused to refer to baptism and the Lord’s Supper as “sacraments.” They have preferred the word ordinances instead. This is thought to be an appropriate term because baptism and the Lord’s Supper were ‘ordained’ by Christ. On the other hand, other Protestants such as those in the Anglican, Lutheran, and Reformed traditions, have been willing to use the word “sacraments” to refer to baptism and the Lord’s Supper, without thereby endorsing the Roman Catholic position.
It does not seem that any significant point is at issue in the question of whether to call baptism and the Lord’s Supper “ordinances” or “sacraments.” Since Protestants who use both words explain clearly what they mean by them, the argument is not really over doctrine but over the meaning of the English word.” Wayne Grudem, Systematic Theology: An Introduction to Biblical Doctrine (Grand Rapids: Zondervan, 1994), 966.
Calvin (though wrong about when baptism is administered!) gave this helpful definition of “sacraments.”
It seems to me that a simple and proper definition would be to say that [a sacrament] is an outward sign by which the Lord seals on our consciences the promises of his good will toward us in order to sustain the weakness of our faith; and we in turn attest our piety toward him in the presence of the Lord and of his angels and before men. Here is another briefer definition; one may call it a testimony of divine grace toward us, confirmed by an outward sign, with mutual attestation of our piety toward him.” Calvin. IV.14.1, page 1277.
Someone may counter, “Well, why not use the term ‘ordinance,’ so that there is never any confusion and the explanation is not needed.” But that is no solution. The centrality of the ordinances/sacraments, and the debates surrounding them, will always require an explanation when they are administered.