When the bill arrives, you have two choices—to rummage through an overstuffed wallet for the right combination of notes and coins, or to flash your credit card in style. But there are many more benefits of using a credit card. This little piece of plastic has the power to let you spend money you don’t have—which, in the wrong hands, will ruin you. It pays to understand the benefits of using a credit card and how your credit limit is determined, so you can use your cards wisely and effectively.
What exactly are the benefits of using a credit card?
Before we begin, remember that the word “benefit” should be taken with a pinch of salt. What is beneficial to a smart, savvy spender could be a ticket to bankruptcy for someone with no self-control. You have been warned.
Now that that’s been said, there are many reasons to use credit cards.
1. Get financed with credit card
The most obvious is the convenience of not having to carry around thick wads of cash and purses jingling with coins, no matter how much you need to spend. What’s more, if you urgently need to pay for something and don’t have the cash on hand just yet, you can “borrow” from the bank the money you need.
2. It is easier to monitor your finances
Ever gotten to the end of the month and wondered where all your money went? If you paid exclusively by credit card, you wouldn’t have this problem. All spending made on credit cards is tracked by your bank or Financial Institution (FI), and any suspicious-looking charges can be disputed. You can view all expenditure on your statement at the end of the month, or even in the middle of the month using online banking. If you’re the forgetful sort, many banks and FIs let you opt to receive SMS or email reminders to pay your bills so you can avoid late payment penalties and interest.
(Bookmark the credit card customer services phone number here just in case!)
3. You can improve your credit history
Using credit cards wisely—by paying your bills on time and mostly in full—you build a positive credit history which will make it easier to get hefty loans, such as for property. Of course, irresponsible credit card use will do the opposite and wreck your credit score.
4. You can enjoy rewards, air miles, cashback and discounts
Credit cards often reward users with benefits that include cashback on your spending, frequent flyer miles and rewards points that can be exchanged for freebies. Many cards offer cashback and discounts in certain spending categories, such as petrol and groceries.
5. You can get free access to airport lounge with credit cards
I am not joking. You can really get into airport lounge with credit cards as exclusive privileges for free. Check out more details about the credit card with free airport lounge access.
6. You can travel without worrying about having to carry around large amounts of cash
Not only do credit cards enable you to pay for things overseas without having to resort to cash, some cards also offer free travel insurance when you use them to book your trips. What’s more, if you’re unlucky enough to get robbed while on holiday, you simply have to cancel your card, file a report with the police and then dispute any charges that have arisen from the wrongful use of your card. That is certainly preferable to getting cash stolen.
7. You can protect your large-sum spending from fraud
Imagine this: you hire a team of workers to set some flooring in your entryway. They spend the weekend cutting, measuring, grouting, placing the spacers and tiles, and letting everything set. They then charge you a hefty sum of $4,000 for their hard work. But what happens when, just 72 hours later, the tiles start to shift and the grout still hasn’t set? Your entryway is now a complete disaster, and your stress levels are through the roof.
Sure, you can take up the issue with your state licensing board, but that’s a lengthy process and the contractor still has your money. That’s why it’s wise to pay for big-ticket items like this with a credit card, if you can. Credit card issuers have an incentive to discourage fraud among vendors, and they have mechanisms in place to try to resolve issues like this.
Plus, if you dispute the charge, the card issuer withholds the funds from the tile setter, and not only will you get your money back, you might even get help finding a new contractor. So, the next time you’re considering a major home improvement project, remember the benefits of paying with a credit card.
8. You can enjoy a grace period
When you use a debit card, your money disappears instantly. But with a credit card, your money stays in your checking account until it’s time to pay your bill. This extra time can be a lifesaver in two ways. First, delaying payment means your purchase is a tad cheaper due to the time value of money. And second, using a credit card lets your cash hang out in your account longer. If you pay your bill from an interest-bearing account, you’ll even earn money during the grace period. So go ahead and treat yourself, and enjoy the peace of mind that comes with not having to check your account balance as often.
9. You can enjoy insurance by holding a credit card
Credit cards offer more than just a line of credit. They come with a slew of hidden benefits, such as rental car insurance, travel insurance, and extended product warranties. Don’t miss out on these perks that could save you time, money, and headaches in the long run. For instance, you can enjoy a Worldwide Travel Insurance with the American Express Platinum Credit Card.
- Min. Annual Salary
- HK$300,000
- Cash back on local spend
- 1％
- Miles Conversion (local spend)
- $5 = 1 Mile
10. Your credit card is universally accepted
Are you having trouble renting a car or booking a hotel room with your debit card? That’s because rental car companies and hotels prefer credit cards. Why? Because it’s easier to charge you for any damages you cause to the car or room, and they may need to block a certain amount of your credit to protect themselves. Plus, if you’re traveling abroad, even if your debit card has a major bank logo, merchants may not accept it. Don’t get stuck with holds on your account or limited payment options. Get yourself a trusty credit card for those tricky purchases.
Wanna stay ahead of the herd? Let’s check out the MoneySmart blog for more financial tips!
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