When it comes to money management, the question still persists: cash or credit? Credit card advantages range from trivial conveniences like carrying less cash to crucial goals like building credit. Depending on your priorities, some perks may help you more than others, so let’s break down the types of benefits and what perks fit into each category so you won’t miss out.
Crucial Credit Card Advantages
HOW TO BUILD CREDIT WITH A CREDIT CARD
Improve your credit score by paying for items and services that you already pay for anyway. The best way to do this is using a credit card, and it’s perhaps the most important benefit of credit cards. Your on-time payments and intelligent use of credit become part of your credit history and can build or improve your credit score over a reasonably small period of time.
“Credit cards are great for building credit if you use them responsibly,” says Bethy Hardeman, a consumer advocate for creditkarma.com. “Start with a card that’s catered to your needs.”
EMERGENCY MONEY
It’s not just that things happen — it’s that they happen suddenly. We all hope to be ready for whatever life might throw our way, and a credit card can increase your peace of mind. While credit cards should not be an alternative to an emergency fund, they can provide extra cushion for unexpected surprises if things go seriously wrong.
SECURITY
By law, your maximum out-of-pocket liability in the case of an unauthorized charge is $50. And oftentimes, you end up paying nothing. Cash is a different thing, entirely. If it’s lost or stolen, it’s gone. Even with the risks of database hacking, skimming and other credit card-related fraud, credit cards remain a reasonably safe method of payment.
Credit Card Perks: Money Savings and Earnings
FREE SHORT-TERM LOAN
While many people still equate credit card use with credit card debt, remember that you don’t have to pay interest to use plastic. Just make sure you pay your credit card bill in full by the due date. You will usually have at least a 21-day grace period from the time you receive your bill, and while this isn’t as long a time period as most loans, it does buy you some interest-free time post-purchase — as long as you pay on time and in full.
CASH BACK & REWARDS
Many credit cards include programs that award you points or from one to five percent cash back for certain shopping categories. Don’t buy unnecessary things or go on shopping sprees just to rack up points, but do pay attention to and take advantage of your credit card’s rewards options.
EXTENDED WARRANTY, PRICE PROTECTION, AND PURCHASE PROTECTION
Most credit cards offer Extended Warranty, a perk that extends manufacturer warranties of your purchases (usually for another year). And many credit cards also offer Price Protection benefits — that’s when you get refunded if you find that the price of your purchase dropped after you bought it. These can be some of the most valuable credit card perks, and they cost you absolutely nothing unless there is an annual fee.
The Convenience Factor
A SMALLER, LIGHTER WALLET
This perk is self-evident. It’s much easier to carry a credit card rather than a wad of cash, especially if you are planning on a large purchase.
ONLINE PURCHASES
You can’t pay cash for online or catalog purchases. If you want the convenience of shopping online from, well, anywhere, then you’ll need to wield your plastic.
TRACKING YOUR BUDGET
If you put all or most of your charges on a credit card, it can make tracking your expenses —and finding your spending trends — much easier. Just take a look at your credit card statements.
Credit card perks are real and pronounced. If you don’t carry a balance and you make your payments on time, you will likely improve your credit without ever having to pay fees or interest. Plus, you get extra protection and convenience.
