Credit cards are a convenient alternative to carrying cash, but they must be used responsibly to avoid getting into debt. The best way is to use a credit card only for what you need – not what you want – and to pay the balance in full each month, and never skip a payment. Besides the convenience, there are a variety of benefits associated with credit cards.
If you are financially disciplined, having several credit cards will build up a good credit rating. Credit scores are important when applying for a mortgage or car loan, and those scores include your history with credit cards. If you have a good – and long – track record of payments, your score will increase.
Rewards and Perks
Many credit cards are connected to rewards programs, offering perks like cash back (or credit toward your statement), gasoline, frequent flyer miles, credits to use for hotel stays, discounts on rental cars and points to trade in for merchandise. If you qualify, some cards don’t have annual fees.
Card vs. Cash
The most obvious benefit to a credit card is that you don’t have to carry a lot of cash. Opening a wallet full of bills makes you a target for theft, and unlike a credit card you can cancel immediately, it’s almost impossible to recover lost or stolen cash.
If suspicious activity is detected on your card, you might receive an alert via phone or text to confirm if you made the purchase. If it appears your credit card has been comprised, your card may be put on hold until it is investigated, and you will not be held liable for fraudulent purchases.
If you buy something expensive such as an appliance, furniture or electronic device, and then discover it is not working or damaged, you can return the item and have the charge removed. Some credit card companies even extend the warranty if you use the card to make the purchase.
When you have a service performed, such as a home or auto repair, and discover that it was done incorrectly, you can dispute the charge and have the credit card company stop payment while you resolve the issue.
Many credit card companies will cover your rental car and travel insurance if the card is used to pay the statement. Some companies offer cell phone protection, whether from theft, damage or loss, if you pay your monthly wireless bill with their credit card.
A credit card statement clearly defines your monthly spending habits, making it easier to adjust when necessary. Some companies even divide your purchases into categories, to help you define your expenses.
Bridging the Gap
If you need to pay for something but are a few days shy of your paycheck, having a credit card can help you avoid a late fee.
If you are traveling – especially in another country – and need emergency assistance and referrals for a medical or legal issue, many credit card companies can help you find answers, especially if there is a language barrier. This can include emergency ticket replacement, lost luggage, loss of prescriptions and valuable documents, and more.
Peace of Mind
Nowadays, it’s almost impossible to book a room, reserve a car or place a hold on an expensive item if you don’t have a credit card. If you are traveling to a distant city and your flight is delayed, your hotel room will still be waiting for you if you reserved it with a credit card.