You might have heard the naysayers, those people who insist that nobody should ever use a credit card because it can only lead to debt. They are wrong. Credit cards lead to debt only when you fail to pay the balance off at the end of the month.
Follow this golden rule to stay out of credit card debt: Pay off the balance at the end of the month. The whole balance. Every month. No exceptions.
If you follow that golden rule, suddenly you are free to discover all the amazing benefits of credit cards.
1. Credit cards make shopping so easy
Yes, that’s why we all love credit cards so much. It makes shopping easy. Credit is so convenient. Of course, that is a double-edged sword if you don’t use your cards responsibly. But if you do, you can’t beat the convenience.
2. Credit cards help you establish credit
You can’t get a car loan or a mortgage without a credit record. Probably the easiest way for most people to establish credit is to sign up for a credit card – and to actually use it. Lenders want to see that you have been managing credit on a regular basis over a period of time, and managing it well. They want to see that you make your payments on time. “You don’t have to use the card every day,” advises Chris Mettler of Compare Cards. “Just make sure to use it a few times each month and best to always pay off your balance the minute your statement comes in.”
3. Credit cards save you money
Credit cards not only establish credit so that you can qualify for a loan. They also help you to get a lower interest rate on your loan. The catch here – yes, there’s a catch – is that you have to use those credit cards responsibly. Missed payments are red flags that make you a higher credit risk. A solid credit record makes you less of a credit risk. How you use your credit cards will determine how good an interest rate you get when shopping for loans, so use your credit card responsibly.
4. Rewards, rewards, rewards
Credit cards these days are stocked full of goodies. They offer cash-back rewards, and who doesn’t like free money? They offer points for travel, for shopping, for all sorts of things. Those rewards not only feel good to collect and to use, but they can also make you a nice sum of money. Consider how your financial situation would be better if each year someone else paid for a week of groceries. Or if every three years, your family’s summer vacation was “on the house”.
5. Credit cards help you stick to your budget
One of the often overlooked benefits of using credit cards is that they help you track your spending. If you use credit cards for most expenses, then all those expenses will be in one place on one statement. That makes tracking expenses easier. And that can make it easier for you to stick to a budget and avoid needless spending.
6. Safer than cash
Carrying cash can be dangerous. Lost or stolen, there is no recovery of paper money. Credit cards have protection and security measures in place. Whether traveling abroad or within your city, credit cards are much safer.
7. Many credit cards offer insurance
This is when it pays to read the fine print. Your credit card might offer out-of-country medical coverage or trip cancellation insurance. It might offer car rental insurance. You have to read the fine print to know, then make sure not to pay for something that your credit card already has covered for you at no extra cost.
8. Delayed payments
When you pay by cash or debit cards, you pay immediately. When you pay by credit card, you have an interest-free loan for up to thirty days. That means you don’t lose the money right away, it can stay in your bank account earning interest even after you take home the things you’ve bought.
9. Universal acceptance
I’ve been stuck without cash in a parking garage and glad to have had my credit card with me. The fact is that almost everybody accepts credit cards. No matter where you go, no matter what the local currency, a credit card is almost always universally accepted.
10. Emergency credit
There are times when things just happen at the wrong time. Something breaks down that needs to be fixed urgently and payday is still a few days away. Rather than resorting to a payday loan in a panic, using a credit card is a much safer approach.
Dave Jones, president of the Association of Independent Consumer Credit Counseling Agencies, explains that “Sometimes, people need their credit card to purchase groceries because they have been laid off. They don’t have the cash to handle emergency situations — whether it is a washing machine repair or the family car breaking down.”
There are many other benefits of using credit cards. Maybe you have already discovered a few more for yourself. Just remember the golden rule to pay off the balance each month, and you will find credit cards to be one of the best inventions since the flush toilet.