To use a credit card or not to use a credit card. That is the question.
Once upon a time, I would have said, ‘do not use a credit card for anything other than an absolute emergency’. However, now there are several reasons to consider differently.
First, credit cards can actually have many perks when used responsibly. It used to be that they were just a piece of plastic you used and then spent however much time paying off, giving and giving to the credit card company. It was in that time that I would have said there was no need to use a credit card unless an emergency struck. But now many credit card companies are giving back to the consumer. These are the ‘reward cards’ that are becoming more and more popular. Rewards can come as cash back, travel rewards, vacations, etc. These rewards come by earning points for each dollar spent on your card. Obviously you can see how this might get a little risky and even dangerous to our financial health. People may spend and spend thinking it’s all okay because ‘they’re earning rewards’ only to end up with tons of debt that they can’t pay off. However, for those who are financially responsible, this reward system is actually a great option. If you can manage your spending and pay off your account balance in full each month, then you are in actuality getting paid to use a credit card.
And second, credit cards can help you build credit. When it comes time to apply for a loan on your first home (or second or third…), loan companies will look to see if you have a history of being financially responsible. One way to do this is through having a credit card that you are in good standing with.
Some other perks to credit cards may include things like extended warranties on products purchased with the card (even beyond the manufacturer warranty), travel protection, fraud protection, discounts with associated stores/companies, tracking expenses easily, charge back rights, insurance for rental cars (so you wouldn’t need to purchase rental insurance when renting), life insurance on flights purchased with the card, and other benefits as well. The benefits vary from card to card as well as the ‘level’ of card that you have (silver, gold, platinum, etc), so read the fine print in your credit card contracts to see what perks you could be taking advantage of!
So yes, there are actually many benefits to credit cards (vs. checks or debit cards), but I’ll say it again… only if you can use your card responsibly! If you struggle with financial responsibility, then it would be wise for you to stay away from credit cards until your spending and management is under control. The smartest thing you can do is to keep yourself out of debt. And then take advantage of the good offers and rewards that are available to you for doing so. 🙂
Here are some good articles to read on using credit cards wisely and responsibly, along with additional benefits to using them:
- Using A Credit Card Wisely
- Use Your Credit Cards Wisely
- 10 Tips For Using Credit Cards Wisely
- 4 Reasons You Should Use a Credit Card
- 10 Reasons To Use A Credit Card For Every Purchase
Photo c/o Lotus Head