Three out of four American adults have at least one credit card. There are many reasons that so many people have credit cards.
Even with American debt increasing, you can still reap the benefits of credit cards. You have choices in the type of credit card you can get as well.
Are you wondering if a credit card is really worth it? Worried that getting a credit card isn’t safe? Check out this guide to learn the answer to “Why use a credit card?”
1. Protection on Purchases
If you make purchases with your card, you can file a dispute on items you want to return. For cash purchases, you are out of luck. You will want to use a card for this protection especially larger items.
If something is damaged, you can withhold payment thanks to the Fair Credit Billing Act. You need to settle the disputes with the seller first before turning to the credit card company.
You also can typically just return things with your credit card if you lost the receipt. With cash, there is no record of your purchase. Some cards also offer price protection if the price of an item you purchased is lowered within a certain amount of time.
If there are any fraudulent purchases with your card, your credit card company will help you with this dispute. You won’t have to worry about losing money from your checking account.
Unlike cash, you can get cash-back rewards or points for using your credit card. Some cards pay up to 5 percent cash back on certain purchases monthly.
Each card has a different rewards program, so you can actually earn money for just using a credit card. You may have to fill out a form online or activate your cash-back.
Depending on the credit card, the point rewards can be used for gift cards, airline travel, or certain products you can purchase with points usually listed online or a catalog from the credit card company.
You can rack up your points just by using your credit card regularly for daily purchases. Why not earn some extra money or rewards for purchases you already make?!
3. Signup Rewards and Bonuses
Several credit cards also offer signup bonuses. You spend a certain amount to qualify and then you get a bonus. You can retire this card after you get the bonus and use the card that offers the better monthly rewards.
If pay your card off monthly, you actually make money using credit cards because of rewards and bonuses. When you don’t carry a balance, you will not have to pay interest.
You don’t have to cancel your card after you get your signup bonus. Closing accounts could actually hurt your credit score, so it’s best to just put the plastic away and leave the account open.
If you decide you want to cancel, make sure you cancel before any annual fees. When you call to cancel, the credit card company will likely waive the annual fee so you keep your account open.
4. Extended Warranties
You may want to consider using a credit card to get extended warranties on larger purchases like electronics and appliances. Some cards, like American Express, offer an additional year warranty on several items. Be sure you keep your receipt in case you need to file a claim.
5. Safer Travel
Carrying cash when traveling can be dangerous. Tourists are often the target of thieves. When you lose that money, it’s gone.
If your card is stolen, you will only be liable for $50 in fraudulent purchases. Some cards give you zero liability. You have to report the theft within two days.
Credit cards will also automatically do the exchange rate for you, so you don’t have to worry about high charge fees. You are guaranteed to get the best available rate.
Most cards have no foreign transaction fees. You will want to let your credit card company know ahead of time if you plan to leave the country.
6. Rental Car Insurance
Several cards offer rental car insurance as a free benefit. Before accepting rental car insurance from the rental company, check your credit card to see if it’s a free benefit. It will save you money.
Be sure you read the rules carefully. Not all rentals are covered, and you may be liable for some damages.
7. Additional Travel Benefits
Why do people use credit cards for traveling? Credit cards offer several benefits for traveling. In addition to the benefits listed above, you may find credit cards that offer the following travel benefits:
- No baggage fees
- Additional baggage loss insurance
- Medical transportation services for emergencies
- Interpretation services in case of an emergency
- Credit card loss protection
Some airline credit cards will also give you free access to airport lounges.
8. Finance Purchases
Why do people use credit cards? One of the other main reasons is to finance purchases.
You can make purchases within your line of credit. If you pay your balance off each month, you don’t have to worry about paying interest. Several cards do offer free financing from time to time to help you make larger purchases.
Be sure to read the fine print on the amount of interest you will be charged and how long you have to pay off the balance before getting charged interest. Having a line of credit available can be really helpful in the case of an emergency such as medical bills, car repairs, or home maintenance.
9. Track Expenses
You can easily track your spending with credit cards. It’s easy to lose receipts, but you can track your spending with your statements. Several cards leave statements online for up to a year.
You can use these receipts to help with tax deductions. If you make charitable donations, you can use your card and have an additional receipt. Credit cards are also helpful for tracking business expenses.
Many cards even offer programs to download your statement into programs to track where you spend your money. This is much more convenient than keeping boxes of receipts.
10. Why Use a Credit Card – Convenience!
You won’t have to constantly run to the bank to get cash if you use your cards. It’s much easier to get out the plastic. You always have access to purchase with your credit card – so much more convenient.
Looking for a Credit Card?
This article answered the question “why use a credit card?” and now it’s time to find the best card for you.
Take a look at Bonsai Finance’s credit card reviews to help you find the right card for your spending.