First of all, let me start with a huge warning: If you run the risk of falling into credit card debt, you should not get a credit card. I repeat: Do not get a credit card if there’s any chance you might start accruing debt.
Some people avoid credit cards because they don’t want to get into debt. That’s totally valid.
But if you can avoid carrying a balance, here are a list of reasons why credit cards can be good for you.
#1: Credit-Building. If you ever hope to make a major purchase in your life, such as a mortgage, then you will need a credit score. One easy and excellent way to build credit is through responsible credit card use. You can build a strong credit score by charging a small amount to your credit card (relative to your total credit limit) and paying the balance on-time each month.
#2: Theft Protection. How often have you misplaced a $5 bill — only to find it in your washing machine six months later? It’s easy to lose cash. Worse yet, it’s easy to have cash stolen from you. Credit cards eliminate this issue. Credit cards come with a laundry list of built-in, free fraud protection, which makes them a safer option than cash.
#3: Third-Party Dispute Resolution. Are you having a dispute with a merchant? A credit card provides you with a third-party intermediary who can help manage the dispute.
Let’s imagine, for example, that a retailer sells you a product that doesn’t meet your satisfaction or that’s significantly different than described. You try to return the product, but the merchant refuses to accept the return. What can you do? If you paid with cash, your options are limited. If you used plastic, you can open a dispute with your credit card company, which will investigate whether or not the charge was fair.
#4: Safer Online Shopping. You’ll obviously need a plastic card — either credit or debit — in order to shop online. Credit cards, however, provide more fraud protection than debit cards, and are therefore safer tools for online shopping.
#5: You Won’t Be Short-on-Funds. When you book a hotel room, rent a vehicle, or fill a gasoline tank, the merchant will put a temporary “hold” on some of your money, to ensure that you have sufficient funds. This “hold” can be anywhere from $100 (at a gas pump) to several hundred dollars.
If you’re using a debit card, this “hold” might result in you becoming short-on-funds. If you’re using a credit card, however, you’re more likely to be able to withstand this hold.
#6: Reward Programs. Most credit card companies provide members with rewards such as cash back and airline miles. These rewards often have a value of 1 to 2 percent of the amount that you’ve spent. If you spend $12,000 per year on groceries, gasoline and other necessities, and you place this on a credit card, you could get up to $240 in rewards. That’s a significant sum.
#7: Extended Warranty Programs. Many credit cards offer free, built-in extended warranties. If you purchase an item that comes with a 30-day warranty, for example, but you purchase it with a credit card, that warranty may extend to 90 days (depending on the terms of your specific card). This provides you with greater flexibility and peace-of-mind when you buy more expensive items like televisions and electronics.
#8: Develop Personal Responsibility. Are you just starting out? Are you trying to rebuild yourself financially? Getting a credit card with a low limit might be an effective “stepping stone” for learning personal financial responsibility. If you’re getting your first credit card, consider a $500 limit as a starter card, and “work your way up” from there.
Kennedi writes about finance for women at Face and Fitness.