Learn 12 Reasons Credit Cards Are Must-Haves for Financial Well-Being

There are numerous benefits to using a credit card as long as you manage your credit spending and payments appropriately. They provide benefits, protection, and convenience.

Why do people use credit cards? Other payment methods, such as debit cards and cash, may appear more convenient to keep them under budget.

Credit cards have a reputation for encouraging cardholders to spend money they don’t have, mainly when tempting offers arrive in the mail. However, at money Under 30, we believe that a decent credit card is a must-have.

When used correctly, credit cards can benefit your financial well-being. In reality, savvy credit card users can earn money simply by using their cards. So, what are the advantages of a credit card, and how may using one help you save money? Here are 12 ideas.

1. They Establish Credit History

The most crucial purpose of obtaining a credit card is establishing a credit history. Credit scores, derived from records of your financial activities, are required if you intend to borrow money. These scores are influenced in part by your credit card history. Unlike debit card use, credit card use is reported to the bureaus that monitor credit scores. A track record of paying credit card balances on time dramatically improves your credit score. And the longer you use credit cards, and the more your credit history will be built, increasing your score even more.

2. They may provide sign-up bonuses.

Many credit cards provide sign-up bonuses as a welcome gift. You usually have to spend a particular amount (sometimes within a set period) to obtain the bonus, so check the fine print. However, it is still a valuable bonus.

3. They Refund Cash

When you use the cash back credit cards to make purchases, you get a little money back. The cash reward can range from 1% to 6% of the purchase price. That may not seem like much, but these rewards can add up to a big bonus over time.

4. They Provide Reward Programs

There are about as many incentive schemes as there are credit cards. The goal is to choose a rewards program that complements your current purchasing habits or partners with a retailer you already patronize.

5. They keep track of your spending for you

Do you want to budget better? Credit card statements include a spending tracker. Your purchases are tracked online, including where, when, how much, and how frequently you spend. Some credit card firms preserve your spending records for years. This perk is convenient during tax season.

You’ll save time and work on your taxes if you already have a record of the previous year’s expenses. A credit card statement will disclose business spending, rental property expenses, charitable contributions, and other challenging tax return areas. They safeguard against fraud.

One of the most significant advantages of credit cards over debit cards is the level of fraud protection they provide. For example, the Chase Freedom FlexSM protects your account by monitoring it in real-time for signals of fraudulent activity.

Assume your credit card is stolen or someone discovers your credit card details online. Even if the thief immediately begins making transactions on your card, you won’t lose much money because credit card charges aren’t removed quickly.

When you tell the card company of the theft, they will place a hold on your card and conduct an investigation. You are not responsible for any fraudulent purchases made in the interim.

Credit card holders are protected by federal law, which keeps you from losing a lot of money. The maximum you might be held accountable for is $50.

And if you report the fraud before making a transaction, or if your credit card provider has a zero-liability fraud policy, you will not lose anything.

Assume your debit card has been stolen. Because debit card payments are promptly removed, any money spent on fraudulent purchases is gone. As a result, any scheduled automatic payments may be terminated.

If the theft is reported within 60 days, the transactions can be reversed, and the money recovered. This, however, takes time and can be even more disruptive than credit card theft.

7. You Can Transfer Your Balance

A balance transfer is when you shift your debt from one credit card to another. Other types of debt, such as vehicle loans and monthly installment payments, might be transferred to a balance transfer credit card. Of course, you’ll still have to pay what you owe. However, transferring the debt to a card with a reduced interest rate saves money over time. Balance transfers can also help you consolidate debt and simplify your life.

8. They may include purchase protection.

Consumer protection is a significant benefit of many credit cards. If you buy something with a credit card and subsequently discover it’s damaged or of low quality, you can return it and get the charge removed. Credit cards may also provide extended warranties on electronics, furniture, and other long-term purchases. In many circumstances, the card extends the manufacturer’s warranty. Keep all of your receipts!

9. They Have Grace Periods Built In

Credit cards, in essence, provide a zero-interest loan for 30 days or fewer. Credit cards, unlike debit cards, do not require you to have the funds for purchase available immediately. You have a grace period to make payment arrangements. Use this grace period judiciously because credit cards perform best for you when you pay them each month.

10. They Include Insurance

Examine the consumer protections provided by your credit card. You may discover advantages you were unaware of. Many credit cards offer return protection, rental car insurance, and travel insurance, extended warranties and purchase protection.

11. They are universally accepted

When it comes to traveling, your credit card is your best friend. Credit cards make it easier to arrange lodging and rental cars than debit cards. Rental providers typically charge a few hundred dollars to your credit card. With a debit card, this hold can be inconvenient.

Credit cards are also more widely accepted than debit cards around the world. If you’re going to a foreign country, use your credit card’s lower exchange rate instead of paying expensive exchange rates for cash at airports. They charge fewer fees. Credit cards do not have overdrafts or individual transaction fees like debit cards. While some credit cards have annual fees, the points and cash back you earn may offset them.

Summary

There’s no excuse not to use a credit card responsibly. A credit card offers rewards, protection, convenience, and regular reporting to credit bureaus, making it simple to develop your credit. Intelligent credit card use can save you a lot of money and keep your money safe while also providing you with some rewards. Not an alarming rate of return on a single form of spending!