When used responsibly, credit cards offer multiple benefits when selected as the form of payment. Credit card companies like when you don’t pay your balance, because they make money off of the interest they charge you. But as long as you pay your balance in full on time, many credit cards are free and offer valuable benefits to you.
When you pay your balance each month, avoiding high interest and late fees, credit card companies reward you. These rewards vary from card to card, so pick one that benefits you the most. Credit cards can offer cashback, travel miles, and rewards. Some give one percentage for all purchases, others give various percentages for specific categories like the grocery store, gas stations, restaurants, travel and more. This can range from around 1% – 2% and up to 5% on specific categories.
Better Credit Score
Using a credit card and paying the balance each month helps your credit score. Your credit score is affected by how long you’ve had the credit, your payment history, and how much credit you use. Opening, using, and paying for a credit card will help build your score which can be beneficial when you need a loan, for instance a mortgage. This shows banks a pattern of responsibility and reliability and demonstrates your likelihood to pay back the loan. This can result in more loan offers and lower interest rates.
A significant difference between credit cards and debit cards is the benefit of fraud protection. Many credit card companies monitor your account for fraud and alert you to it. If fraudulent charges are made, you are not liable. If someone stole money via your debit card, they could take everything in your account and you would be at the mercy of the bank. If someone steals your credit card information, they steal the credit card company’s money, not yours.
Many credit card companies offer additional benefits such as travel insurance and price protection. Rental car damage coverage, trip cancellation coverage and more are available through some cards. Price protection can offer a refund if you find a lower price for an item you purchased with your credit card within a certain period of time after the purchase. Both of these additional benefits can save you money.
It is important to live within your means, and if a credit card is too great a temptation to overspend, it may not be the best form of payment for you. Responsible credit card use requires attention to monitoring your spending. Unlike a debit card that is declined when the money runs out, a credit card lets you rack up the debt. If you cannot pay the full balance at the end of the month, you are stuck paying high interest and fees. But this is can be easily avoided by watching your spending, allowing you to partake in all the benefits a credit card offers.
The benefits of a credit card are numerous and hopefully this overview has encouraged you to learn more. To discover which credit card would be most beneficial to you, browse and compare credit cards online. Check out various card sites or utilize sites such as nerdwallet.com to find the right card for you.