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8 Benefits of Owning a Credit Card

benefits of owning a credit cardFirst 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, there are actually 8 benefits of owning a credit card that you might want to know about.

8 Benefits of Owning a Credit Card

Really? Eight benefits? That’s quite a lot for someone to ignore. Check them out and decide if a credit card is right for you!

Related: Top Credit Cards for Good or Excellent Credit

1) Credit-Building

One of the top benefits of owning a credit card? Building your credit.

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.

Related: What If I Had a Zero Credit Score? The Pros and Cons…

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. This is one of the best benefits of owning a credit card in my opinion – you spend like you normally would anyway, and you get money back!

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.

Can you think of any more benefits of owning a credit card? There are many!

Kennedi writes about finance for women at Face and Fitness.

Credit Cards Save Money

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

7 Comments

  1. When I moved to Canada from the UK it was the credit card that helped me to build credit. That in turn helped me to get a mortgage and for creditors to have better faith in my ability to pay back any debts.

    • That’s fantastic! What a great example of using a credit card to responsibly build a credit history and improve your life!

  2. Great list! Personally, what I love about my credit card is how easy it is to track all my purchases and see exactly how much I’m spending and on what. I used to be a cash-only gal, but I was unaware of the amount I was spending each month. Additionally, I have a self imposed limit on the CC.. I can’t spend more than that x amount, so it limits my desire to spend.

    • @Ronnie — Credit cards are a fantastic way to track your spending! Everything that you’ve spent money on is there for you, all on one page!

  3. Having a credit card as a teenager or college student can teach you a lot about financial management, especially the importance of paying bills on time. Getting a head start on managing your money now will only help you in the future.

    • I think it is good for some, as long as they are ready for it and truly understand what it means to spend money on a credit card.

    • @Ryan — Getting a credit card with a low limit is a great way for a teenager, or someone new to credit, to learn personal responsibility. It’s “training wheels” for the future.


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