The Benefits of Using Credit Cards

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Convenience, security, and establishing a good credit profile are the most obvious advantages of using a credit card. But there are many less obvious reasons to consider, such as; budget planning, additional product protection benefits and warranties, travel insurance and more. Here are six benefits of using credit cards that you should think about.

1.) Convenience & Safety

There’s no easier way to make a purchase than by using a credit card. With an available line of credit, you won’t have to deal with the hassle of standing in line at the bank or hunting for a pen to write a check. You won’t get stuck in line counting out change and you won’t have to worry about overdrawing your bank account. Plus, plastic is much safer than cash. If your card gets lost or stolen, you won’t be responsible for any fraudulent charges.

2.) Special Reward Incentives

Rewards are seen by many as the ultimate perk of using credit cards. It has been estimated that 75% of all credit cards have some type of reward attached to them; typically offering two types of programs: cash rebate and point-based rewards. Point-based programs are the least favorable since the items being exchanged for points are often over-valued. But airline miles (a form of point program) are great if you travel extensively. Cash back is beneficial to almost anyone and is the most widely used reward incentive.

3.) Building / Maintaining Healthy Credit

Regardless of how you feel about using credit cards, there’s no better way to build and maintain a healthy credit history. A good credit history is the key to financial security, whether you’re buying a new car, getting a mortgage or even trying to land a new job. Here are several points to consider when using credit cards to establish your credit history:

  • maintain credit card debt of less 50% of your limits,
  • make minimum payments on time,
  • never exceed your credit limit.

4. Budgeting Assistance

As odd as its sounds, using a credit card can help you to establish and maintain a budget. Your monthly statement is an itemized list of how you manage your expenditures each month. By examining each statement, you can see just where adjustments need to be made to live within your means. Of course, this means that you need to be able to pay off the balance each month which is a major part of a healthy budget. Also, the option of having separate credit cards for home and business expenses can be beneficial when reviewing your expenses and preparing your financial plan.

Some credit card companies send quarterly or year-end account summaries showing how you’ve used your credit card, listing purchases by categories, ie: retail, dining, travel, etc. These records can often be transferred to your personal finance program through the companies website.

5.) Purchase Protection & Warranties

If you’re unhappy with something you bought with a credit card, check with your credit card provider for an extended warranty plan – double or up to 12 months beyond the products original warranty. Find a lower price after your purchase? Price protection ensures that you are credited with the difference between your purchase price and the lower one.

6.) Travel Benefits

Travelers are offered many benefits by using a credit card, including; car rental damage protection, cancellation insurance, and accidental life insurance. In fact, most car rental companies require a credit card to rent a vehicle, and credit cards are the preferred form of payment by airlines. When you’re far from home these additional benefits can be a great comfort.

Cancellation insurance not only covers the full fare when a trip gets cancelled or interrupted, but it also covers lost or stolen belongings, medical or legal emergencies for you, your spouse and children. In addition, your checked bags are automatically covered with this service.

Car rental collision/damage insurance is another service offered by many credit card issuers if you rent a car using a credit card. This protection may cover medical, legal, lost luggage and emergency transportation services.

BE SMART:

Even with all of these benefits, credit cards are only advantageous if you’re diligent and use them carefully. Review your credit card terms regularly to make sure that you’re getting all the best features: rewards, no annual fee, low interest rate, etc. Compare credit card offers often, as they change frequently. Don’t hesitate to transfer your balances or to apply for new credit cards that will increase your ability to take advantage of these benefits.