Here’s my roundup of six brilliant benefits of having a credit card and why they are a useful tool to have in your money-management toolbox.
7 BENEFITS OF HAVING A CREDIT CARD
If ‘credit card’ came up in a word association game, it would be very easy to link it to the word ‘debt’. There is a good reason for that; it is extremely easy for your spending to get out of control with a credit card.
Credit card spending is basically spending borrowed money. It’s like taking out a loan every time you make a payment. The credit card companies want that money back, plus they want it back with interest if you don’t pay it off in full each month. That’s how credit card companies and banks make money from credit cards.
So there is a line of thought that it is better to live life without using credit cards. I totally disagree with this. I think credit cards are a must as part of managing your personal finances well.
Because if you know how to manage your credit card well it can be a brilliant way to be more in control of your finances and even help you on the path to financial freedom.
Of course, if you don’t manage your credit card, spend way more than you can pay back and don’t pay more than the minimum repayment each month, your credit card debt could easily spiral.
Given that you’ll likely want to be managing your credit card well, here’s a list of the main benefits of having a credit card.
7 BENEFITS OF HAVING A CREDIT CARD
I believe credit cards have a number of advantages over using debit cards or cash. Take a look and then decide if you agree.
1. KEEP YOUR CASH IN YOUR ACCOUNT FOR LONGER
Your hard-earned cash can stay in your checking account for longer, hopefully earning interest, because you won’t need to withdraw it to pay for your purchases until the end of each month when you pay your credit card off in full.
2.PURCHASE PROTECTION / WARRANTY
Purchase protection means that if you buy something with your credit card and later find out it is damaged or poorly made, you can return it and get the charge removed from your card.
It also acts as an extended warranty on electronics, furniture and other big-ticket items, you just need to check your credit card issuers terms and conditions for full details.
3. FRAUD PROTECTION
Federal US law limits liability for credit card fraud to $50. You just need to notify your credit card issuer as soon as you know your card has been lost or stolen.
4. IMPROVES YOUR CREDIT SCORE
Credit cards help build your credit history and therefore improve your credit score. Your credit score and credit history will be used to assess your eligibility for important loans such as mortgages.
A good track record of managing your credit card well and always paying your balance on time will do wonders for your credit score.
5. CASHBACK / REWARDS
What could be better than earning money every time you spend?! Ok, it’s never going to be a huge amount of money, but every cent helps. Plenty of credit cards offer cashback on purchases and plenty offer you rewards that can be used to make future purchases.
6. EFFICIENTLY TRACK YOUR SPENDING
It’s so much easier to keep track of your weekly and monthly spending if you do the majority of it using your credit card. This is great for managing your finances and sticking to a budget. I check my online credit card statement on a weekly basis and then adjust my spending if necessary.
7. SUPER CONVENIENT WAY TO PAY
Because credit cards are a trusted way of paying, they are almost universally accepted. You need never scrabble around for cash. This also makes credit cards useful when you’re travelling. Plus the exchange rate for using them for purchases abroad is often better than paying cash exchange rates.
So there you have it, six great benefits of having a credit card. If you use your credit card it can be a valuable tool in your personal finance management toolbox. You can save money, keep your money protected and even earn money from using a card.