Credit cards often get a bad rap. While it’s true that some have interest rates higher than others and charge exorbitant fees, the problem is more likely a result of their improper use than the card itself. There are numerous benefits to them over a debit card or cash. While you may not choose to make every purchase with it, paying with a credit card instead of cash simplifies recordkeeping. A quick review of your monthly statement reveals where you’re overspending. Cardholders can use this information to create or modify a monthly budget.
Establishing a credit history is a priority.
Paying your credit card bill on time each month and keeping your balance low can actually boost your credit health. Major credit card issuers submit a record of cardholder payment activity and balance information to at least one of the major credit reporting bureaus: Equifax, TransUnion, or Experian. Making a purchase using cash or a debit card will not help your credit.
You’re able to secure a zero percent introductory interest rate.
Some credit card issuers compete for your business by offering a low introductory rate for a limited time. This promotional rate may apply to new purchases, balance transfers, or both. Cardholders can use this opportunity to save money on large purchases or by paying off higher interest cards with a balance transfer.
Carrying a balance on a high-interest rate card for months or years can keep you in the debt cycle and stall your plans for a new home purchase or early retirement. Depending on your credit health, you might secure a new card with a zero percent introductory or promotional rate. When you transfer your debt to a credit card with a lower interest rate, you can get out of debt sooner since you’ll save on interest charges.
Travel plans include a hotel stay or car rental.
A weekend getaway or a family road trip is less stressful when you pay for expenses with a credit card. While hotel reservations can be made using your debit card, actually paying with that card can put the freeze on travel fun. Hotels may place a per-night hold of $50 to $100 on your debit card to cover incidentals. Sometimes this happens even if you’ve prepaid your entire stay. The hold means those funds aren’t available for withdrawal during your stay. Use credit for car rentals and hotel stays to bypass the typical account holds that come with using debit cards.
You like limiting your liability.
Major credit and debit cards offer fraud protection, but credit cards limit your liability to only $50 for unauthorized charges. You may be responsible for up to $500 in charges if you fail to report the suspected unauthorized activity with your debit card quickly. And with cash, there are no protections against loss or theft.
You can earn cashback.
Rewards credit cards can help you earn while you spend. For example, the Generations Earned Rewards no annual fee credit card lets cardholders earn cashback on every purchase. With no limit to the amount you can earn, deciding between an Earned Rewards card and cash becomes easy. Pay your bill in full each month, and you can avoid interest charges and make your earnings go even further.
Big purchases need protection.
Saving for a large purchase, such as a television or other electronic device, is smart. But, when you pay for your items using cash or a debit card, you could be missing out on purchase protections at no additional cost. Protections available with credit cards might include the ability to:
- Return an item within 90 days if you’re not satisfied or if the retailer is unwilling to accept the return
- Receive a refund for the difference if your purchased items go on sale at another retailer within 60 days of purchase
- Be reimbursed if a purchase is stolen or damaged within 90 days of purchase
Return Protection, Price Protection Guarantee, and 90-day Purchase Security are just a few of the benefits available when you use your Earned Rewards credit card (additional conditions apply).
Credit cards can be powerful tools to use in building a solid financial foundation. Understanding how to use them to achieve a specific goal or benefit is key to making them part of a successful money management plan. If you want to earn cash back each time you use your credit card, apply for a Generations Earned Rewards or Earned Premium Rewards credit card today!