Credit Cards: Blessing or Curse?
by Scott Faith
If you’re a veteran, or any American for that matter, should you regularly use credit cards?
The obvious answer is “yes.” But many personal finance experts or financial websites will tell you to stay away from credit cards simply because it adds to your debt and can make you do impulsive purchase. But if you look closely, credit cards offer a lot of benefits for its account holders and one doesn’t always have to be in debt when you use it wisely and prudently.
In fact, when you plan well, you can get more out of a credit card purchase than a debit card one simply because these credit card companies are standing in a queue to woo customers like you with excellent offers. You can get cash back on certain purchases, preferential access in popular restaurants and flights, and other perks that will eventually help you earn some extra cash.
So, here are some reasons to use credit cards today.
Most credit cards today offer a sign-up bonus. This can be a certain amount of money in the form of cash back that could range anywhere from $50 to $500, depending on the number of purchases and the offer given by credit card companies. Some cards do not give cash back but instead give you reward points that can be redeemed later for money or other offers in dining and travel.
You get none of these additional benefits when you sign up for a bank account or a debit card and that’s where a credit card scores over them.
Credit cards come with a rich reward system where you get something back for every dollar you spend. Though the exact nature of reward points varies, there is no doubt that you’ll get back something for every dollar you spend. For example, some credit cards reward you with certain points that can be redeemed into cash or other benefits while others make it even more fun by specifying the categories that will earn you points. This category keeps changing every quarter and when you follow it, you get rich rewards for all the purchases you want to make through the year.
You can use these points to earn free perks or can even choose a product from the “rewards catalog” of the credit card company.
Frequent flier miles
One of the many reasons for people to choose a credit card is the frequent flier miles that comes with it. In the past, you can earn this reward only when you travel a certain number of miles with an airline. But that has changed now and you can convert the reward points you have against your account into frequent flier miles as well.
This is a big advantage if you love to travel often and have the benefit of combining two reward systems together so you can get more miles for free. A good example is the British Airways credit cards that allow you to tap into both the reward systems and combine them. You may even get a free first class upgrade at times.
Protection from frauds
When you have credit cards, you get complete protection from frauds. In general, when a thief steals your debit card and uses it, the money is instantly taken from your account. It can take a while for the bank to investigate the fraud and return the money back to your account.
But in the case of a credit card, there is no instant debit. If your card has been used fraudulently, simply let the credit card company knows and they will resolve the issue. You lose no money and there is absolutely no hassle whatsoever for you.
One of the biggest reasons why people use a credit card is to fund the gaps between their income and expenses. If you run short of money or an unexpected expense has come up, you can use your credit card and pay after 30 or 45 days, depending on the terms of the card. This is a huge advantage if you don’t have enough funds to meet an expense, but will get money at the end of the month. Such flexibility is not available when you use a debit card or bank account.
The other advantage with a credit card is you get to build your credit score, provided you use it well and make payments on time. Though some argue that debit cards are better because none of your transactions appear in your credit report, the truth is they don’t help to build your credit score either. This score can have a big impact when you go it for a mortgage or car loan.
From the above discussion, it is clear that credit cards offer a ton of benefits for cardholders. They help to save money, give discounts and cash backs, offer good travel and entertainment rewards, and so much more.