While many are familiar with the risks, few people are aware of the many benefits of using a credit card instead of cash or debit. Here are seven reasons why you might want to reevaluate how you pay for your everyday purchases.
Paying with a credit card is easy and it often saves you time. You don't have to go to the bank or find a nearby ATM to get cash. You also no longer need to fret about overdrawing your bank account and incurring insufficient funds fees.
You Can Get Rewarded To Use Them
Credit card companies will actually pay you to build up your credit. Airline miles, cash, hotel room discounts and store credit are just a few of the many rewards that credit card companies offer their card users as an incentive to use their particular credit card. Why use cash or debit when you can get rewarded for using your credit card? Remember that you should not necessarily increase your credit card use simply because you are getting rewards for using it. It is very tempting to increase credit card use to get more rewards. However, this can lead to an increase in credit card debt which is not advisable unless there is a corresponding increase in your income to offset the increase in debt. A handy rule of thumb to remember is "do substitute, don't complement". This means that you should substitute your rewards credit card for payments that you currently make using a non-rewards card, debit card or cash. You should not increase your overall spending simply to get more rewards.
You Build Up Your Credit
Obtaining and using a credit card for everyday purchases can be an easy and efficient way to build and maintain good credit. Since building and maintaining a strong credit score is essential for home ownership, receiving an auto loan, and getting approved for other types of financial transactions and product purchases, the prudent use of a credit card can help you to create a strong credit profile.
Avoid Losing Money Due To Fraud
As opposed to cash and debit card transactions, credit card purchases are paid by the company that issued you the card. At the end of each month, the credit card company charges you for all of the purchases made within the current billing cycle. This is an important feature that can help you avoid losing money due to fraud. For example, imagine that you order a product online. If you pay for the product with cash or a debit card, the money will automatically be transferred to the seller of the product. In the event that you never receive your product because of seller fraud, it will be very difficult to get your money back. However, if you pay for the product using a credit card, you can simply refuse to pay the credit card company for the product when you receive your monthly statement. The credit card company will then go after the individual or company that committed the fraud and you will avoid losing your money.
On a related point, if your purse or wallet is stolen, you will likely lose all of the cash in it. However, if you use your credit card instead of cash when making purchases, you can cut back on the amount of cash you carry around. If your wallet or purse is stolen, you will lose less cash and you can report your credit card as stolen to your credit card company. Your credit card company will not make you pay for any fraudulent changes as long as you report the card as stolen.
Set Up Automatic Bill Payments
Many people take advantage of their credit cards by using them to set up automatic bill payments. For example, most cell phone carriers will allow you to enroll in automated billing which automatically bills your credit card each month. This is convenient because you no longer have to remember to pay your bill every month. It also eliminates the possibility that you forget to pay your bill. You can also enroll in automatic billing to pay for utilities, cable, internet, and rent. Some service companies even offer discounts to customers who enroll in automatic billing. If you decide to set up automatic billing, you should make sure that you still review your statements each month to check for errors and fraudulent charges.
Avoid Debit Card Fees
Many retailers have begun the practice of charging customers fees for using their debit cards to make purchases. However, most of these retailers do not charge you for using a credit card. Therefore, you can save money on purchases by using your credit card instead.
It Can Help You Create A Personal Budget
Many credit card companies offer spending reports to their customers. These reports are helpful when trying to assess your spending patterns because they categorize your spending into buckets such as groceries, gas, bills and entertainment. The reports also allow you to make month over month comparisons of your spending habits. This is helpful when trying to create a personal budget because the reports give you a clear picture of where you have been spending your income.