Great Reasons to Use Your Credit Card
Published on October 19, 2012 by Michael Martin Leaño
Finance gurus devote a lot of their time telling everyone not to use their credit cards. It’s understandable since many dig themselves into a financial hole because of credit card debt. However, there are actually many great reasons to use your credit card, just as long as you use it sensibly. Here are some of those reasons.
Reason #1: Building credit
Working to improve your low credit score? Then use your credit card responsibly. But for you to boost your credit score quickly, you’ll have to pay your card’s balance in full every month. Yes, you can use cash or your debit card to avoid debt altogether, but doing this won’t increase your credit.
Reason #2: Convenience
It’s hard (and dangerous) to carry wads of cash around. Credit cards, on the other hand, are easier to bring and hide on your person. Besides, credit cards actually have wider acceptance than cash—it can be used in all corners of the globe at a mere swipe. Cash still needs to be exchanged if you’re abroad.
Reason #3: Rewards
There are several forms of credit card rewards: petrol rebates, airline miles, discounts, cash back, and points, among others. Whatever your card provides, it subsidises some of your expenses and gives you better value for your money. However, you shouldn’t use your credit card just to earn its rewards because you might end up overspending.
Reason #4: Safety
Did you know that your credit card can protect you from fraud? If you lose your card and report it immediately, you’re protected from subsequent unauthorised purchases. Any fraudulent purchase made before that can be contested and you won’t lose money in the process. In contrast, if your debit card is used fraudulently, it would take quite a bit of work to get your money back—if ever you do get it back. Cash isn’t that safe either; lose your money and it’s most likely gone for good.
Reason #5: Grace period
Using cash requires you to part with your money right then and there. With a credit card, you still have to pay for your purchases but its grace period gives you several days to do so, and this helps your cash flow, especially if you need to use your funds somewhere else.
Reason #6: Insurance
Credit cards, particularly the gold and platinum types, have a comprehensive range of insurance including life insurance, disability insurance, product warranties and travel insurance.
Reason #7: To spread payments
Credit cards let you buy items that you normally can’t afford to pay in one sitting. This allows you to spread payments to make the purchase more affordable. To make full use of this advantage, however, you need a card with a low interest rate or long interest-free periods. Just take note that this practice doesn’t help improve your credit score. Furthermore, you might end up spending more than what you’re supposed to, especially if you pay only the minimum amount each month.
Reason #8: Reduce the cost of debt
You can reduce the cost of your credit card debt by transferring your balance to another card with a lower interest rate. For instance, if your credit card has an interest rate of 17 per cent p.a., transferring your balance to another with a zero per cent rate for the first nine months would let you trim down your debt. However, to make good use of this opportunity, you should pay the debt in full before the new card’s introductory rate reverts to its regular rate, even if the regular rate is smaller than your previous card’s rate.