Credit Cards – What are the benefits?
Ah… credit cards – often seen as an evil bit of plastic to many, yet everyone uses them. But how does this actually stack up? We either know someone who thinks (or even think ourselves) that credit cards are inherently bad and can only lead to debt. Moreover, there’s the belief that credit cards are for only people who have no money and are irresponsible.
But in reality, credit cards are actually the opposite. Credit cards offer better protections and rewards, whilst also genuinely being a lot more convenient to use than other types of payment.
That being said, when used irresponsibly, credit cards can rack up big debt and lead to financial problems. Want to know more before we begin? We’ve got an entry guide here to get you started!
Personally my favourite reason to own a credit card. Lots of credit cards actually offer you rewards on every purchase that you make. This could be in the form of points, cashback, or loyalty bonuses. You can earn rewards to a magnitude of different merchandise.
The next time you spend your money knowing you’re either going to earn points towards a hotel stay, airline miles, or getting cashback, it’s a much better feeling than using a debit card or cash, and getting nothing from it.
One of the reasons we wrote an article around American Express is due to their multitude of cards to choose from. You can decide for yourself which one you think is best.
You can obviously get loyalty cards – which means you can pay with cash/debit and still get rewards. But these are limited to those selected retailers, whereas a credit card reward is much more flexible and versatile in paying off.
Building Your Credit Score
In our articles around credit, we explained that having a credit card actually helps your credit score if you spend responsibly,
Your credit score is really essential for your financial goals in the future. Whether that be acquiring a loan or a mortgage, having a good credit score makes these things easier and cheaper to get.
Using cash/debit to make your purchases will not help your credit score as you are not using credit. This is why using a credit card and then paying off the amount IN FULL every month will help your improve your credit score, and save money in the future.
Purchase protection is a big plus to using a credit card when making your purchases. Obviously, the level of purchase protection depends on the individual credit card and bank. Nevertheless credit card protection is a lot better than spending your money on a debit card, and of course 100% better than cash payments.
The basic protection you get with credit cards centres on fraud protection when you use a credit card, but you also have protection against damaged goods or items you haven’t received, or items not delivered as promised. – Can’t really complain with that can you?
Other Credit Requirements
Some purchases actually do require credit card payments/deposits in order to make the purchase. For example, renting a car and being under the age of 25 – some car rentals ask for a credit card as a deposit for the car you are renting. They won’t accept cash or debit down payments as the amount is larger than the total money you have.
Car rentals can even ask you to run a credit check before allowing you to pay with a debit to make sure you have a good history of paying money you owe (or might owe in this case if you were to damage the car). Remember, you don’t want a hard search on the account and get nothing but the ability to rent the car.
Obviously, credit cards do have their drawbacks, but if you use them correctly and pay off your balance IN FULL every month, then you will incur no interest and only have the rewards from them.
Credit cards give you rewards, protections, and sometimes give you access to exclusive rewards you would otherwise not be able to exploit.
Most importantly, you should weigh up your own financial situation before applying for a credit card. If you know you can afford to have a credit card, by paying it off in full every month, or only spending on the credit card what you would spend normally, then a credit card can be a good option to consider.