10 Reasons to Use Your Credit Card
Responsible Credit Card Uses
A credit card comes with quite a few dangers and this is probably the main reason why most finance specialists advise their clients against them. Most people who own a credit card abuse it and end up in debt. But for some people if done in moderation, credit can be useful because a credit card can be much more practical than a debit card or cash. Let’s see what makes credit cards such an advantage and how to properly benefit from them.
- One-Time bonuses
The welcome bonus is probably one of the best reasons why most people would apply for a new credit card. For good credit cardholders and excellent ones, there are numerous credit cards that offer sign-up bonuses starting from $150 and up (and in some cases, quite code 150 dollars), provided that the applicant spends a certain minimum amount ranging from 500 to several thousands in the first few months.
In comparison, with debit cards, there is no such thing as bonus offers or regular rewards at a later time. Other forms of redeemable rewards like travel points, miles or even cash-back which go towards certain purchases like travel, gift cards or merchandise etc are some of the features that credit cards may also have.
- Cash Back
The rewards system of cash-back originated in the U.S. with the concept of Discover’s cards, which started off with 1 percent back. In one way or another, cash-back options have become more widespread since some cards promise to give back 2%, 3% or even 6% back (with limits on allowed ram fees). If you want to make optimal use of the cash-back cards available in the market it is best to seek those which have high returns and low fees and interest.
For instance, the Fidelity Rewards card gives 2 percent cash back on every purchase you make but that cash back is only redeemable in fidelity’s investment account.
- Rewards Points
With the use of credit cards, it is possible to earn points for some spending incurred on every dollar. They may also offer extra bonus points for transactions that are done in dining, grocery, or fuel. After collecting enough points you can use them for tickets, access provisions, or other items.
The available options in redeeming the rewards are nearly endless. Co-branded cards such as those for airlines and hotel chains and some retail card-holders can earn by everyday spending. Having the correct card based on your expenditure patterns will increase utility.
- Frequent-Flyer Miles
One of the earliest credit card perks was frequent-flyer miles. This happened in the U.S. in late 80s when the American Airlines and Citibank’s roped in the credit card people in most of the transactions involving a credit card.
Megapoints are awarded by almost all airlines nowadays, and businesses offer cards that allow miles within these earnings. Some cards even come with a high initial bonus, which is enough to redeem a good portion of a free flight.
- Safety
If you want to avoid fraud, paying for purchases using a credit card protects you better than using a debit card. When your you lose a debit card, the money is taken out of your account at once, and the recovery of this money can be time consuming.
With the help of a credit card, you can notify them about the illegal activity and deny them the right to charge you while the matter is under investigation. Gеnerally speaking, it is like giving your credit card to a dealer that rents motorbikes. If a purchase is made that is not authorized, many credit card networks like visa and mastercard assumes no liability either.
- Keeping Vendors Honest
In case something does not go well, purchasing expensive items or services using a credit card may be helpful. For example, when engaging the services of a construction agent, if the quality of the work is not satisfactory, you have no obligation to pay for anything until the situation is resolved by the credit card company. This is advantageous when dealing with check or cash payments which theoretically puts you in a weak position as you do not have such leverage.
- Grace Period
Funds are directly deducted from the account as soon as the debit card is used. However, using a credit card allows consumers to keep their money in the bank up until the due date of the applicable bill. This additional time has advantages that include the ability to earn interest on the available balance of a checking account that bears interest.
Moreover, you will not have to keep such close track of how much money you have in your account since no money is spent until payment for the credit card has to be made.
- Insurance
For the most part, most credit cards provide protections to the consumers that go unnoticed such as rental car insurance that often comes as second coverage to your own car insurance policy, travel medical insurance, and additional warranty. Such advantages can help you avoid buying some additional insurance or help you claim in case adverse events occur.
- Universal Acceptance
Some transactions and payments like renting a car or reserving a hotel are simpler with the use of a credit card. Credit card are hospitality business merchants because merchants will always place a guarantee on the line of credit for any damages or extra charges incurred.
When paying with a debit card, the user’s funds may encounter a substantial hold, which can limit the amount of money in your account. Moreover, known as bank cards, these cards are also not freely used when one is overseas.
- Building Credit
Responsible credit card use will also allow building or raising one’s credit score especially because it is customary to report payment activity to the credit bureaus. Though, it is important to take note that transactions with the use of a debit card do not help build any credit score. Even starting with a secured credit card can always be seen as an initial step as it allows building a good credit history and acquiring better cards or larger loans later.
When Not to Use a Credit Card
When doing transactions, convenience in the way credit cards are used has a risk of incurring losses at times causing them to use a debit card or cash for the transaction. There are some retailers who offer discounts upon making cash payments as they do not incur credit card transaction fees hence making it cheaper. Apart from that if you are poorly skilled in controlling your expenditure or find it hard to pay the entire amount, then credit usage may be ill-advised because it will attract debt and interest.
In a nutshell, the advantages of credit cards are undeniable for individuals who are capable of responsibly handling them. How it would work is by adapting your daily patch of spending and moving it to credit card transactions and paying a zero balance for each corresponding month so that you are able to enjoy the advantages of these rewards programs including protection on your purchases and other financial benefits while reducing the risk.
