When used responsibly, credit cards offer several advantages for the discerning consumer. Most importantly, they are essential for establishing a good credit score. By paying off your monthly credit card balance in a timely fashion, you will create a strong credit history, which results in an improved credit score. A good credit score can help you to qualify for car loans and mortgages with lower interest rates, potentially saving you thousands of dollars over time. Credit cards also come with the following, lesser-known benefits:
Each credit card has its own unique rewards system. Some will give you a lump sum of points for spending a certain amount of money on the card within a given timeframe and others give cash back when you use your credit card to pay for particular goods or services. These incentives vary from card-to-card and make each appealing in its own way.
2. Emergency Funds
Sometimes, you might not have the cash or sufficient funds in your bank account to pay for an unforeseen circumstance. Having a credit card on hand provides an added sense of security–if you can’t purchase what you need with your own money, you can always turn to your credit card lender for a quick fix.
3. Buyer’s Insurance
Many credit cards come with complementary purchase protection. This means that if an item is lost, stolen or broken within a certain period of time after the purchase (usually 90 days), the credit card company will reimburse you.
4. Theft Protection
If your card is lost or stolen and you report it immediately, you will not have to pay for any purchases fraudulently made on your account. Compare this to the devastation that inevitably comes from losing a wallet full of cash!
5. Merchant Protection
If a merchant fails to provide a good or service that you paid for with a credit card, you have the option of contacting the credit card company and disputing the transaction. The company will then investigate the transaction and, if they find in your favor, will refund you completely.
6. The Only Accepted Payment Method
Some services, like car rentals and hotel reservations, can only be purchased with a credit card. This is due to the fact that credit cards come with the added assurance that the merchant can recover any incidental costs you might incur.
7. Travel Expenses
In addition to providing the benefits listed above no matter where you are, credit cards typically provide the best foreign exchange rates whenever traveling abroad.
Having a credit card provides a number of essential conveniences that don’t exist for those limited to debit cards and cash. The opportunity to develop your credit score also makes credit cards a great option for anyone looking to save money on a daily basis and prepare themselves for long-term financial goals.