by Maurie Backman | Sept. 19, 2019
Credit cards may get a bad rap, but they trump cash in many ways.
You’ll often hear that credit cards are a dangerous spending tool that leads to nothing but debt. And for some people, that’s true. But if you use your credit cards wisely, you’ll get to reap the following benefits, which you simply won't get with cash.
We all have essentials we spend money on month after month, such as groceries, phone service, and fuel for our vehicles. The beauty of credit cards is that they give you rewards in the form of cash back, miles, or points for purchases you were planning on making anyway.
Some credit cards even offer generous sign-up bonuses for making purchases soon after opening them. For example, you may be eligible for $500 cash back if you make $3,000 worth of qualifying purchases within three months of opening an account with a sign-up bonus. Now, it’s not worth overspending just to snag that money, but if you have $3,000 worth of legitimate expenses in the pipeline, like new furniture or a major car repair you’ve been putting off, then that’s an easy way to get free money.
Certain credit cards can actually make the things you’re buying or doing less expensive. For example, if you have a store credit card for a retailer you frequent, you may be eligible for extra savings, such as 10% off purchases within a certain timeframe, or 5% off purchases made anytime. Furthermore, if you book a trip with a travel rewards credit card, you might snag perks like free checked baggage that make your journey less expensive.
When you use a credit card to buy something new, you’re not completely out of luck if that item gets lost, damaged, or stolen, because your card’s purchase protection program will often cover you to some degree. In some cases, you may even get the entire value of that item back, depending on your card’s coverage limit.
Furthermore, some credit cards offer price rewind programs that ensure that you get the best deal on the items you buy. If you purchase something using your credit card and find it for a lower price shortly thereafter (usually 30 days, or sometimes 60 days afterward), your credit card company will often pay you the difference.
When you make purchases on a credit card and pay your bills after the fact, that information is reported to the credit bureaus that determine your credit score. And if you make a point of paying those bills on time, your score is likely to climb.
Additionally, the right credit card could help lower your credit utilization, which is another major factor in determining your credit score. Utilization speaks to the amount of available credit you’re using at once, and the lower that percentage, the more your score benefits. Having a credit card with a generous credit limit could therefore come in handy in this regard.
Let’s be clear: Credit cards are only better than cash when they’re used appropriately. The moment you start to carry a balance on one of your cards, you start to rack up costly interest that basically equates to throwing your money away. And while having a high credit limit could help boost your credit score and give you more flexibility to pay for unplanned expenses, it can also lead to overspending. But if you use your credit cards responsibly, you can enjoy a host of perks that cash alone can’t match.
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