5 excellent advantages to using credit cards
A world without credit cards is a terrible world. Who wants to go back to a pre-credit world where we have to use grimy cash and can only buy things we can afford right this moment?
Not me.
Luckily, we don’t have to exist in such a poor reality. Credit cards are not the evil things that consumer advocacy groups make them out to be. In fact, there are major advantages to using credit cards over debit cards and cash:
1. Cash back and rewards
Who doesn’t like getting something for nothing? Credit card companies make a lot their money via transaction fees charged to merchants when you use your credit card. Because of the competition between credit card companies to get their card in your wallet, Visa, MasterCard and American Express have begun offering incredible rewards as enticements. Today, even a basic free credit card offers between 1% and 2% cash back on purchases.
There are credit cards that offer rewards like free flights, merchandise, and other perks. In some cases, you can even get lucrative credit cards that offer more than 2% cash back. Pay attention to the rewards available. As long as you pay off your balance and avoid interest charges, you can improve your financial situation by using credit cards.
2. Warranties and protections
Credit cards offer built-in extended warranties and protections. Because of these warranties and protections, it’s almost universally encouraged that you pay for large purchases like electronics with a credit card. That way if your washing machine breaks down 13 months after you purchase it, you might be able to claim a replacement or another form of compensation through your credit card company, even if the original manufacturer’s warranty is expired.
Another protection offered is safety from fraud or theft. If your credit card is stolen or cloned, you aren’t on the hook for any purchases made by the thieves. The same isn’t true for cash.
3. Grace period
Let’s say you need to buy a new set of tires but you won’t have the money for a couple of weeks. Thanks to grace periods on credit cards, you don’t have to have the entire amount upfront. When you make a purchase, you have between one and 30 days before you get your bill (depending on when you made the purchase). Once you get your bill, you have a 21-day grace period (sometimes longer, depending on the card) before you are charged interest. This means you can buy your new tires today and pay your bill off slowly until the grace period is over.
4. Insurance perks
The theme of this post so far has been that credit cards get you free stuff. One of the best reasons to use a credit card while traveling is the travel insurance perks that are included for free. Did your bus crash? Did your airline lose your luggage? Has your flight been cancelled because of weather? In each of these situations credit card travel insurance might pick up the bill, depending on the card you have.
5. Building credit
Cash doesn’t build credit. Debit cards don’t build credit. Credit is needed to buy a house, take out a personal loan, or buy a car. Building credit now can be a good way to stay ahead of the game and save money by qualifying for the lowest interest rates on major loans.
Stop using cash and debit. It seems like a smart idea to only spend money you can touch or see in your account but you’re leaving serious benefits on the table. Aside from the cash back and rewards, credit cards offer consumer protections, free travel insurance, and let you borrow their money for free for at least three weeks. The advantages of using credit cards greatly outweigh the disadvantages.