Maybe You Should Use Your Credit Cards More Often

There are several compelling reasons to use your credit cards for everyday purchases.

Aug 31, 2014 at 10:15AM

A large number of Americans, especially in the younger age brackets, use their debit cards to pay for most purchases. While there is nothing inherently wrong with this, it's not always the best way to go.

Credit Cards Pd

There are several good reasons for using credit cards more for everyday purchases. For one, you are much less vulnerable to theft of personal information, which as we know from the headlines is a serious problem these days. You can also earn some pretty nice perks and build a more solid credit history.

While I'm not advocating running up the balances on your credit cards, using them responsibly and correctly can help your finances now and moving forward.

Better protection
Theft of credit and debit card information is a recurrent threat these days. While no one is immune to the massive data breaches seen in recent months and years, credit cards are less susceptible to other forms of theft.

One of the more common methods of stealing information is by using a device known as a "skimmer." This is a small card reader installed on a point-of-sale system in which customers swipe their own cards (such as a gas pump), and it is often installed with a small camera to see the cardholder's personal identification number. A debit card number and its PIN are really all a thief needs to make a fraudulent copy.

When you swipe a credit card at one of these places, you don't type in a PIN, the card's expiration date, security code, or any other information that would be necessary to duplicate the card. Some ask you to type in the billing ZIP code, which adds a level of security.

Of course, none of this is foolproof. It's entirely possible to have your credit card information stolen. Thankfully, virtually all major credit cards have a zero-liability policy for fraudulent charges. Not all banks do -- so even though you probably won't be held responsible for the entire amount of fraudulent charges, you could easily be on the hook for some money.

The perks can be nice
Credit cards can also earn you some sweet perks. For example, already in 2014 I've earned enough airline miles for a free trip, simply by charging for goods I would have bought anyway.

Delta Public Domain

Source: Wikimedia Commons 

If you prefer cash, it's pretty easy to find credit cards that give you 1.5% back on all of your purchases. Over time, these can really add up. And many don't have any annual fees whatsoever.If you travel a lot, the rewards can be nice. In addition to miles, you can avoid baggage fees, be allowed priority boarding, and other perks.

Building a solid credit history
Many consumers avoid credit card use entirely. But as long as you pay off your balance each month, it's better to use your credit cards than to let them sit in your wallet, or worse yet, to not have any at all.

The largest component of your credit score is your payment history, which is easy enough to establish by simply using your cards and paying them off. The next largest component is "amounts owed," which assesses the amount you owe on your credit cards relative to your available credit. By just having one credit card you could be hurting yourself here.

Let's say you just have one credit card with a $1,000 limit. If you charge $200 worth of groceries, you are using 20% of your available credit. However, if you have three credit cards with $10,000 in combined limits, your credit use would be just 2%, which can look much better to creditors.

A little-known aspect of your credit score is "types of credit used," which accounts for 10% of your FICO credit score (the one most lenders use). Not having any credit cards can lower this part of your credit score considerably. Essentially, it gives banks no reference point to determine how responsibly you would handle a credit card.

The takeaway
There are other perks to using credit cards. For one, it can be much easier to track your purchases every month. As an example, I have one card I use only to buy gasoline. At the end of the month, if there is $250 on the card, I know I spent that much at the gas pump. The same goes for groceries and eating out at restaurants.

The key point here is that you should use your credit cards for purchases you were going to make anyway, and that you already have enough money to pay for. Carrying a balance on your credit cards is counterproductive to your financial health, so these rules apply to using credit cards as a debit card replacement only.

With some responsible usage, you can help protect yourself from thieves and put a little extra money in your pocket, all while building an excellent credit history for your future.

Your credit card may soon be completely worthless
The plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers