Credit cards are frequently abused and are the cause of a
lot of personal debt. However, credit cards bring you a lot of advantages as
long as you use them wisely. In fact, credit cards are frequently a better way
to pay for things.
Consider these benefits:
1.) Sign-up bonuses. Many credit cards offer
significant rewards when used responsibly. For example, consumers with good
credit can be approved for credit cards that offer signup bonuses. These
bonuses can be worth $50 to $250 or even more. Some credit cards provide reward
points that can be used to redeem things like gift cards or airline tickets and
much more!
2.) Cash back. With the right credit card, you can
earn from 1-5% back on all your purchases. Depending on how much you use it,
that can be like getting a raise at work!
3.) Investment rewards. Some credit cards, such as
the Fidelity Investment Rewards Card, give a higher rate of cash back. However,
that cash back must be deposited directly into an investment account. This is
also nice because it encourages you to invest and save.
4.) Frequent-Flyer miles. Nearly every airline has at
least one credit card offering. The ultimate value of these cards is really
determined by the specifics of the card and the airline tickets you actually
receive and use. The details can vary so shop around.
5.) Safety. Using a credit card makes it a lot easier
to avoid financial losses due to fraud or unfortuna timing on automatic
payments.
For example, if you pay your bills with automatic
payments directly out of your checking account, these automatic drafts can also
potentially result in insufficient funding fees and late payments, which will
have a negative effect on your credit score.
If your debit card is used fraudulently, your money is taken
out of your account instantly. It can also take some time to get your money
back. By comparison, when your credit card is used fraudulently, you don't lose
any money; you simply notify your credit card company and you don't have to pay
for those transactions.
6.) Grace period. Credit card usage gives you time to
pay, usually a couple of weeks on the average before any interest kicks in.
With a debit card, the money is gone instantly. If you have your money in a
high-interest checking account, the amount of interest you will earn can be
significantly more over time by paying for your purchases with a credit card.
When you put your purchases on your credit card, your money will spend more time in your checking account, where it's earning money for you. If you use a debit card for your purchases, the money is in your account for a much shorter length of time, thus earning less interest.
7.) Insurance. Most credit cards include a plethora of consumer protections that most people aren't aware of. This includes things like rental car insurance and travel insurance. Some product warranties are also made more advantageous when you pay for the item with your credit card.
8.) BUILDING CREDIT
If you don't have a credit history or if you need to improve
your score, a credit card can help raise your credit score. Obviously, this
assumes that you use your card wisely. Debit cards do nothing to help your
credit score.
As you can see, credit cards aren't bad provided you use them responsibly. In fact, credit cards have a lot to offer. So dust off that credit card and put it to good use; just be sure to pay it off in full every month or as close to it as you can to maintain a good credit score.
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