Six Reasons To Use Your Credit Card

Six Reasons To Use Your Credit Card

Reading Time: 4 minutes
Credit cards attract a lot of bad press when it comes to personal finance. Most of us probably have a card that takes up real estate in our wallet, reserved for the occasional large purchases or for an emergency. But you’re missing out on some excellent perks for not using your card. A credit card is a wondrous thing, but the temptation to use it may sink you into debt. Using your credit card correctly, including not carrying a balance, may help you build your credit profile in fast and reliable ways, and earn valuable rewards. Today, the financial sages at MoneyWizard examine some of the reasons why you should use your credit card more often.

1. To Earn Rewards

One of the best arguments for using a credit card is the potential to rack up rewards for every transaction you complete. These rewards include rebates, points, frequent flyer miles, or gift purchases you can spend on future purchases. You can redeem points earned for things like hotel stays or travel.  Most credit card providers run programs that encourage you to spend more to score more rewards. Some rewards cards may provide rotating or permanent bonus categories that let you earn higher reward rates on specific purchases—like dining or travel. Others will provide exclusive access and discounts to concerts, sports events, and shows, or concierge services and VIP treatment in airports.  

2. Insurance and Consumer Protection

Credit cards safeguard you and your money from fraud as most issuers carry a zero-liability policy for unauthorized purchases. It follows that you won’t be held responsible for purchases made without your consent or knowledge. That’s why we recommend you make your online purchases with credit cards—it’s safer in the event your information is compromised. The best part? Reporting a stolen card or a fraudulent transaction is exceedingly simple.   Another perk is purchase protection or extended warranties on items you buy with your card. You can also request a charge-back in the event of a dispute with a merchant and get a refund if the price of an item you purchase with the card drops after you complete the purchase.

3. Credit Cards Help You Build Credit

You might think avoiding credit cards altogether is advisable because it’ll save you money (since you can avoid interest payments). Sadly, however, when you don’t put your credit card to use, you’re missing out on the opportunity to build a credit history.  Using your credit card regularly and responsibly is one of the easiest ways to build your credit. And while you may already use a debit card that pulls money from your checking account, this activity isn’t reflected on your credit report. Credit card activity, like repayments and balances, appear on your credit report and help you establish a history that lenders can use to assess your creditworthiness. Maintaining a reasonably low balance and making timely payments each month will contribute to your history and subsequently, your score. Your credit score will impact a full range of payments, and the higher your score, the less you’ll pay. A good credit score may help you qualify for a lower interest rate on your mortgage loan than someone with a poor credit score. The same applies for an auto loan.

Using your credit card responsibly will help you establish a good credit rating, which could mean significant savings on multiple aspects of your personal finance cog.

4. Credit Cards Can Help in an Emergency

Everybody’s been short on cash at some point in their life. That doesn’t mean your responsibilities and basic needs suddenly evaporate. On top of that, sometimes, your emergency fund can’t cover surprise home repairs, car repairs, or medical bills. Holding a credit card allows you to pay those emergency costs, helping you through those challenges. It might seem counterintuitive to spend money you don’t have. Yet, in special instances, life demands that you rely on credit.  Provided you’re responsible and strategic, you’ll pay these debts off in due time, which will bolster your credit history in the long run. A credit card can save your day by paying for your small, manageable expenses as well as a real emergency, like paying an insurance copay. Remember, it’s fine to use your credit card for an emergency—provided you have the cash to clear the balance before the interest starts accruing. In this case, consider using a rewards credit card with an extended interest-free introductory period. Alternatively, you may consider getting a credit card that’s dedicated to emergencies only.

5. Cheap Foreign Exchange

Your credit card may be a convenient solution when you don’t want to carry cash on the fly. It’s fast, easy, and more secure than carrying a stash of foreign currency that you don’t have your head around. Your credit card could also come in handy if you’re stuck buying US dollars at your bank branch or a foreign exchange booth at the airport. With the right credit card, you can enjoy cheap foreign exchange rates as well as liability protection for all foreign purchases.

6. They Track Your Spending for You

These days, it’s easy to track your spending, whether it’s accessing your statement online, in the mail, or through mobile apps. There’s no need for you to manually record all of your purchases. Tracking your spending helps keep your expenses on a parallel track with your income to reduce overspending, and using a credit card is your best bet. Credit cards will send you monthly statements that display your monthly transactions, making it easier for you to keep tabs with your spending compared to using cash. Most also provide online apps that make it simple to prepare a budget and keep an eye on your spending. Ultimately, you’ll only spend within your means and draw closer to your financial goals.

Use Your Credit Card Responsibly

A credit card can be a great financial tool that offers irresistible perks to those who use it responsibly. It can be an excellent way to finance purchases and build credit but it can also cause debt and hurt your score when used poorly. Make sure you have the discipline to clear your balance every month and track your spending to account for your cash flow. There are many good reasons to put your credit cards to work. Committing to the disciplined use of your credit card will help your overall finances. Regardless, a healthy respect for the damage they can do is also necessary. So, the next time you receive a credit card application from your bank—don’t shy away. Instead, do your research and see if the terms make sense for you.

Your credit score can have a big impact on your financial future. Sign up for Experian to get your credit score and credit report for free! Join millions of other Americans and get the tools you need to help understand, manage, and master your credit—in under 3 minutes. Checking your credit score with Experian won’t hurt your score.

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