According to finance experts, credit cards are not good for our financial wellbeing. They really have a point; considering how many of us miss out on the point and end up in huge debt. However, a credit card can be a means to an end if used wisely. It is better to make purchases using your credit card than a debit card or even dealing with cash.
Below are the reasons you should consider using a credit card:
Back in the 1980s, the American Airlines, United Airlines, and US Airlines; now known as the American, offered miles to customers using an affiliated card. At present, almost every airline offers a credit card.
Cardholders compile miles using $1 one mile rewards or sometimes $2 for one mile reward. The price of the air ticket determines the value of your reward. However, a good number of them are made valuable through their mileage signup bonuses. This saves you 50%-100% airline money within a couple of months.
Amazing Rewards and Points:
With many credit cards, you earn up to $5 on each dollar spent. There are usually three months promo periods where you earn rewards in a specific category of spending. You can earn rewards from restaurants, transportation or airline miles. When you have acquired certain points, you can redeem them or make a purchase from the credit card online reward category.
The credit card has almost endless rewards. You can increase your rewards using a co-branded credit card from any company or from a nonprofit- organization such as the American Automobile Association (AAA). All you need to do is to figure out the items you spend most on and get a credit card for your purchase. Assuming you patronize a particular hotel or airline, get their card to increase your reward, discount and continued patronage with them.
You Have a Grace period:
You have a grace period when you make a purchase with your credit card. Your money does not go, rather it remains in your checking list until you pay your bills. While with a debit card, your money is deducted immediately after the purchase.
Credit card grace period affects your account in many other positive ways. During that period, your cash still remains in your account. If your account is a high-interest checking account, you earn from your money during the grace period. Generally, you earn from time value and infinitesimal.
Discover was the first credit card issuers to popularise the cash back idea in the United States. The idea is that you get a 1% cash back on any item you purchase no matter where you make the purchase. Some credit cards now offer more than 5% cash back on a few selected purchases. For example, Fidelity Rewards Card offers 2% cash back on all purchases if your cash is deposited into a Fidelity investment account. The cash back ideology has come to stay.
The Signup Bonuses:
There is nothing so amazing as a welcome perk. An applicant with good credit can be offered a sign-up bonus between $50 to $500 or even more. Other cards offer reward points to new customers but can be used only for fun. Debit cards with a bank account offer minimal and in some cases no reward.
Making payment with credit cards protect you from fraud. For instance, if your debit card is used by a thief, you lose some money from your account meant for other expenses. Also, your mailed check might bounce because of insufficient account making your creditors unhappy. All these will impact your credit score negatively. Such incidence takes a longer time to rectify and your money reversed while your bank investigates.
Unlike a credit card, when you encounter fraudulent activities on your credit card, you are covered and not required to pay money you did not use. All you have to do is to report to your credit card company for a follow-up. Again, when you always make purchases with your credit card, you have no point watching your bank account balance as closely.
Building Credit Score:
If you have a less than a stellar credit score or perhaps do not have one at all, proper management of your credit card can boost your credit score. Remember, your credit issuers report to your credit bureaus concerning your payment activity. The debit card can’t build your credit score. It does not find its place in your credit report.
Many credit cards offer insurance to cardholders. Some types of insurance offered are travel insurance and product insurance in case of stolen, lost or broken items. These additional warranties exceed that of the manufacturers. They can help you save some dollars by offering you the opportunity to reject the extra insurance on an item you purchased or rented.
Credit cards are universally accepted. But with a debit card, it is difficult to make some purchases. For instance, if you want to rent a car or book accommodation in the hotel, the credit card will always make it easier. In fact, rental companies and hotels want customers with credit cards so that they can be charged in case of damage.
With a debit card, hundred of dollars will have to be put on hold on your account before you receive any of the above services. Again, you stand the chances of being rejected by merchants in a foreign country.
The credit card has many benefits over debit card if used properly. One of the major secrets of proper credit card management is that of paying your balances in full monthly. Do not have a balance on your account, pay off in full each month to build both your credit score and your account history.