Top 5 Reasons You Should Use a Credit Card
When we consider the role of credit cards in our finance, it’s easy to focus on the negatives.
After all, failing to pay your credit card bills on time each month can accumulate high-interest debt that forces you to spend more in the long term. Not to mention, late payments do a lot of damage to your credit score.
However, careful, intentional use of a credit card can improve your finances if you avoid these pitfalls.
Here are the top five reasons why.
Credit cards are the best way to build your credit score.
If you want to take out a loan, acquire a mortgage to buy your first home – or even benefit from better rates and financing for commodities such as a car or insurance – then having a good credit score is necessary.
This is because a good credit score indicates that you’re financially responsible: and that you’re able to reliably pay your bills on time and are, thus, more likely to keep up with future repayments on time.
However, though many people are good with their money, there’s often little – or no – record of this fact, making it challenging to acquire loans or make certain purchases.
For this reason, it’s a good idea to make regular purchases on a credit card – as long as you’re confident you can pay your credit card bill each month and you won’t spend above your credit limit – as it’s the easiest, most effective way to build a good credit score.
You can receive cashback on your purchases.
Many credit cards now allow cardholders to – essentially – obtain free money as a result of using their credit card for purchases.
Credit cardholders can earn from 1% to 6% of the value of each purchase made with their credit card, which can add up to hundreds earned throughout the year.
While this is an enticing feature, credit card users should be cautious about not overspending to earn more cashback since you’ll still be spending more overall. Even more important to note is the fact that high-interest debt accrued due to not paying off your credit card bill entirely is not offset by cashback offered by the card provider.
You can receive bonuses and rewards.
Compared to debit cards, a unique feature of credit cards is that their use comes with special rewards and benefits.
Many credit card providers will offer an immediate ‘welcome’ cash bonus for becoming a credit cardholder, yet it doesn’t stop there.
Most credit card providers offer rewards if you spend a certain amount with particular businesses or in specific purchase categories. At the same time, most credit card providers provide the opportunity to earn points on purchases which can be redeemed for rewards such as gift cards or air miles.
Increased protection against fraud.
If your debit card – or your card details – are stolen and used to make purchases with the funds from your account, it’s likely you’ll never see the money retaken from your account unless the criminal using your card is caught. Even then, it might be months before you see your money again.
In contrast, if you notice purchases made with your credit card that you didn’t make yourself, you can immediately alert your credit card company. Even if they fail to find the fraudster, the credit card company bears the cost of fraudulent activity rather than you.
Along a similar vein, if purchases are made from a retailer who fails to deliver on their promise, for example, if a purchase arrives broken, or not at all, or the business itself has closed down or gone bankrupt in the meantime – then the credit card company is often obligated to provide the cardholder with a refund if the retailer does not.
They’re helpful for travelling.
When abroad, it’s pretty common for merchants to turn down regular debit cards, particularly in hotels or car rental facilities, as it’s more difficult to charge for damages past the original payment, which is why credit cards are often preferred.
Credit cards tailor-made for travellers – called ‘travel credit cards’ – often provide more advantageous exchange rates and forgo the fee associated with making purchases abroad when using a regular debit or credit card.
So, if you’ve been considering getting a credit card – but you’re not sure whether the benefits outweigh the costs – remember that there are a multitude of perks that come with owning and using a credit card as long as you use it responsibly, making sure to pay your credit card bill on time each month.