Credit card benefits. Credit cards are one of the most divisive financial tools that exist. In one extreme camp you have people who swear by them because of a lot of the reasons that I will get into later in this article. And on the other camp are people who would not touch them with a ten-foot pole because of the risk of going into debt that they bring. Well, I’m here to tell you that I have lived in both camps in different times of my life. There probably is no “right” or “wrong” camp to be in so I fall somewhere in the middle. But for now, let me explain some credit card benefits so that you can have more of a complete picture to make the decision of whether to have credit cards or not. Let’s go.
(1) Credit Card Benefit #1: Building Credit
The first (and maybe most obvious credit card benefit is that they can help to build (or rebuild) your credit. Credit cards are a fast way to bring a really low credit score to a mediocre credit score or even a mediocre credit score to a good credit score. Also, in order to have an 800+ credit score, it is pretty much a requirement to have at least one credit card.
The trick is to use your credit cards responsibly, though. Here is an article on how to do so. 🙂
(2) Credit Card Benefit #2: Fraud Protection
The second credit card benefit is that they have really good fraud protection. If your card is lost or stolen and someone (without your permission) makes purchases on it, you are not liable for those transactions.
But guess what? If the same thing happens to your debit card (from your bank), you are not responsible for the purchases either.
The difference between a debit card and credit card fraud protection is timing. If you report that your credit card was stolen and there are purchases on it that are fraudulent, the credit card company will generally credit you the money back almost immediately.
If the same thing happens with your debit card (from your bank) you will also get the money credited back to your account. However, it can often take a few days. So the question is, can you make it without that money for a few days? Hopefully. But not everyone will be able to.
(3) Credit Card Benefit #3: Rewards
This is the credit card benefit that most people think of.
Yes. There can be a lot of perks to having credit cards. In fact, my wife and I frequently pay for our vacations from credit card points and reward miles.
However, there is a major problem with this. Most people spend EXTRA money on credit cards because of the reward points. I have been guilty of it myself. I have thought, “If I just spend $100 more, I can get an extra $25 Amazon gift card.” This is like a cat chasing its tail. Don’t do it.
By all means, if you have credit cards, take advantage of the reward points and airline miles for things that you are ALREADY going to be purchasing. But don’t make special purchases or extra purchases to chase down the points.
Final Thoughts
I have said it once, and I’ll say it again:
If you are regularly carrying a balance on your credit card(s) you are not financially responsible enough to have them in the first place.
I know that sounds tough. But no amount of fraud protection, credit building, or reward points are worth carrying a balance on your credit cards. The interest and fees are just simply too high.
55% of people carry a credit card balance. And I would bet that most of them do so in order to chase down the reward points. It just doesn’t make sense.
If you find that you are carrying a balance on your credit cards consistently, I’ll tell you this:
It’s okay.
I have been there. I have done it too.
And I am here to help you get out of the cycle of credit card debt. And I’ll do everything I can to give you the tools to achieve your financial goals.
I’m here for you.
You can do this!
Until next time!
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