Depending on your discipline, credit cards can be a great way to manage your finances responsibly, however on the other hand, poorly handling the virtually endless credit limit could leave you well into debt if you are not careful, that could take years to get out of. It used to be that credit cards had the perception of being used when you didn’t have the money to make a purchase. While I guess that still may be true for some, especially when it comes to large purchases not having the full payment up front, but there are actually plenty of reasons why credit cards are not only great to use, but that can actually benefit from making all of your purchases with them.
While you may come into contact with a couple of gas stations that impose minimum purchases of $5 or $10 to use a credit card (or even a local bar that gives you a hard time if you want to cash out with each purchase, and even set minimum purchases of $15), you can find that you typically do not to even worry about having cash on you anymore. While in the case of emergencies it can’t hurt to carry a few bucks on you, your credit card is accepted virtually anywhere and everywhere.
Going along with either being your downfall or having the discipline, credit cards come with great payment flexibility. The purchases you make in a month will be due on the next month’s statement, so that is nice if you want a little buffer between when you make the purchases and when they come due. If you are unable to make the full balance payment by the due date, you can carry over and pay it down each month, but keep in mind that interest will begin charging, so unless you secured a 0% APR promotion, you will need to pay off the balance before you continue to accumulating interest and run the risk of going into debt.
As soon as you turn 18 years old you can sign up for a credit card and begin building credit, which is not only important when starting out, but also maintaining great credit. By charging and paying off the balance each month you will see your credit limit continue to rise, as well as your credit score, which you can now see on the monthly credit card statements. If you continue to charge you may see your limit still increase, but as you approach the credit limit ceiling, your score will start to drop, showing lenders that you may not be able to handle credit responsibly.
Better Fraud Protection
It’s crazy these days to see how much fraudulent activity goes on. Within the past year I have been hit twice somehow, once using my debit card. The problem with getting hit on your debit card is they spend the money from your account (fortunately mine was a small amount), and you are out the money until you are able to get it back. With a credit card, you can dispute the charges and while you wait for them to be reversed you are not sitting with an empty bank account, and hopefully by the time the bill comes it will be sorted out, and if not, just avoid paying those charges until they are.
Simple to Book Hotels & Rental Cars
Sure, you can book a hotel room or rental card with a debit card, but you will notice a large hold on your account, that will take a few hundred out as a security deposit, and while you will return or checkout a few days later, the hold may stay on your account for up to a week, missing out on that money. With a credit card, the hold will come off a few days later, not affecting any payment you need to make.
Rewards, Rewards, Rewards!
Saving the best for last, the credit card rewards. These are my favorite. Basically, you can earn rewards just by making purchases on the card, so depending on the type of card you have you could accumulate rewards points to turn into gift cards, or even better, could add up dollars that you will receive a cashback check once a year to use as you please. Sure, the more you spend the more you will earn, but if you don’t look at it that way, and the fact that you earn money just on making the purchases you would make anyways.