Importance of using Credit Card

Finance experts spend so much energy on ensuring that we do not use credit cards for some acceptable reasons. Most people do not use credit cards properly and usually end up in debt. Though contrary to the common saying that if you can use the plastic very well, you are better off paying with a credit card than with a debit card and minimize your funds’ transactions. There are certain credit card options and strategies we can use.

Bonuses

Initially, there is nothing like bonuses attached when you receive a new credit card. Most times, applicants with good and excellent credit may be approved for credit cards that issue out bonuses which are given in exchange for spending a certain amount of funds during the first few months the account is open. Other cards attract applicants with their bonus rewards marks which can be redeemed for gift cards, checks, statement credit, merchandise, and travels. A standard debit card that comes with bank checking accounts usually comes with no bonus or any opportunity to earn rewards.

Cashback

This type of credit card was first known in the United States which was very simple as you use the card, you get 1% of your purchase returned to you in a cash form. In this modern age, the strategy has grown and matured as some cards offer from 2% to even 6% of cash return on selective purchases, though it sometimes requires annual or quarterly spending caps. The most preferred cash back card are the ones that charge lower fees and interest while still giving high rewards. Some cards such as the fidelity reward cards give 2% of cashback on spending but you have to pay in your cash directly into a fidelity investment account.

Reward Scores

Credit Cards allow their customers to earn either one or more scores per dollar they spend. A lot of reward points offer certain ways of spending such as grocery, restaurant, or gasoline. When these earnings reach a certain point, they get rewards for either gift cards from retailers or restaurants or merchandise items directly from the credit card company’s online reward portals. The reward options are usually endless. If you receive a branded card partnering with a hotel chain, a nonprofit organization, or even a clothing retailer then you can level your everyday expenses and earn valuable rewards every day. The best thing is finding the card which best suits your spending patterns that will encourage your patronage by giving you enhanced rewards and discounts.

It’s Safer

Making transactions with a credit card is easy and it helps to avoid losses from fraud. About your debit card, if it’s stolen by a thief, your money instantly disappears from your account.  Legitimate expenses for which you have scheduled payment online or mailed checks may bounce back causing insufficient fees and it may affect your credit. It may not be your fault, as the late payment or misses payments can lower your credit score. If fraudulent problem occurs, it may take time for the money to be returned to your account while the investigation commences. If your credit card is used by fraud, you don’t lose your money, instead, put a call through to your credit card company and do not pay for the transactions you did not make while the company resolves the issue. Some credit card networks do not provide any liability coverage for any authorized transactions to encourage users of their cards over cash or checks.

Grace Period

When individuals make a debit card transaction, the money goes immediately. But when one makes a credit card transaction, the money does not leave immediately until the credit card bill is paid. Relying on your money in this little time can help through the time value of money. Time wasting of eventual payment causes your transactions to be a little bit cheaper than they should have been. Above that, when making payments with your debit card and credit card either in cash or check, your money spends more time in your bank account. Secondly, when you consistently pay with your credit card, you won’t need to be checking your account balance.

Insurance

Automatically, some credit cards come with consumer protection which some individuals do not even know they have. This may include car rental insurance, product warranties, and travel insurance.

Building Credit Scores

If you are trying to build your credit score or do not have one, the responsible use of a credit card will help the credit card company to send a report of your credit activities to the credit bureau. However, if a debit card activity does not appear anywhere in your report, it can help you upgrade your credit history and helps you get a secured credit card if you desire one. It can also qualify you for huge loans and unsecured cards.

When You Should Not Use a Credit Card

Paying with cash is better than paying with credit cash. Retailers prefer credit cards as they want it to be easier for you to shop with them. The marketers still pay some of the major credit card companies some part of all their sales in form of transaction fees. Some retailers give a discount for Honor of getting your cash immediately since the cash means more to the retailers than a credit sale. There are a few other reasons why paying with a credit card is not too good and usually has to do with how you spend. To use a credit card is not right for you if you tend to :

1. 1. 1. Spend more than you can afford as spending with debit will limit you from spending the money you have already earned.
      2. If you can not pay your credit card balance in time and in full. If such occurs, it is advisable to use the debit card or cash to avoid going into credit card debts and incurring interest charges.
      3. If you get a credit card with a low limit and have a tough time staying under this limit. This act can put a bad record on your credit scores.