Personal finance experts spend a lot of energy trying to convince people not to use credit cards. Credit cards allow people to carry of a lot of personal debt and can be a major source of stress for our clients. However, credit cards provide many advantages as long as they are used wisely.
Here are a few benefits of using a credit card:
- Building credit. If you don’t have a credit history or if you need to improve your score, a credit card can help raise your credit score. Debit cards do nothing to help your credit score. We offer a credit improvement program to help clients improve their credit scores so that just 2 years after filing bankruptcy they can qualify for a regular-interest mortgage or car loan. Part of the credit improvement program includes getting a credit card and using it responsibly.
- Cash back. With the right credit card, you can earn from 1-5% back on all your purchases. That’s like having a permanent discount on everything you buy.
- Investment rewards. Some credit cards give cash back that must be deposited directly into an investment account. This encourages you to invest and save.
- Frequent Flyer miles. Nearly every airline has at least one credit card offering. The ultimate value of these cards is really determined by the specifics of the card and the airline tickets you actually use. The details can vary so shop around.
- Using a credit card makes it a lot easier to avoid financial losses due to fraud or unfortunate timing on automatic payments. If your debit card is used fraudulently, your money is taken out of your account instantly. It can take some time to get your money back. By comparison, when your credit card is used fraudulently, you don’t lose any money; you simply notify your credit card company and you don’t have to pay for those transactions.
- Most credit cards include a variety of consumer protections that most people aren’t aware of. This includes things like rental car insurance and travel insurance. Some product warranties are also made more advantageous when you pay for the item with your credit card.
As long as credit cards are used responsibly, they provide many advantages. The most important thing you can do is pay your balance in full, on time, every month. Commit to do that, and credit cards will only be a benefit to you.