5 Ways Credit Cards Can Actually Save You Money

If you don't think credit cards have any value, you should read this.

Chances are good you've heard lots of warnings about how expensive credit cards are. And those warnings are worth listening to. In fact, you absolutely want to pay attention to the high interest rates on credit cards and avoid carrying a balance so you don't find yourself sending a fortune to your creditors each month.

But while credit cards can come at a big cost if you pay financing charges, they can also save you money if you use them wisely. In fact, here are five ways you could end up with more money in the bank by using credit cards.

1. You can earn rewards for purchases you'd make anyway

One of the best ways credit cards save you money is by reducing the cost of your purchases. If you buy items you'd otherwise need but use a cash back or rewards card to do it, those rewards end up paying you back part of the money you spent. For example, if you have a cash back card offering 2% back on all purchases, you essentially get a 2% discount on everything you buy.

2. You have strong fraud protections

Credit cards provide you with strong protection against fraudulent charges. With most cards, you are not responsible for paying the cost of any unauthorized charges on your card. By contrast, if someone stole your cash, there'd be nothing you could do and you'd just be out the money.

3. You can avoid having to purchase travel insurance

Many credit cards offer various types of travel insurance. For example, you might get car rental coverage or trip protection insurance with your cards.

Since you might otherwise have to buy these types of insurance, you save the money you would have spent on them. And your card might offer insurance you wouldn't necessarily have paid for that can save you a fortune if something goes wrong.

For example, many credit cards offer lost luggage protection that reimburses you for necessities if your luggage is delayed or that can pay for the cost of items that go permanently missing if your luggage disappears for good.

4. You can get other types of consumer protections

Some credit cards offer other kinds of protections as well. For example, your card might provide price protection and ensure you're reimbursed if you buy an item and the price goes down in the days or weeks after you made your purchase.

Cards also routinely offer extended warranties that make the manufacturer warranty longer. If your item breaks during this extended warranty period, this can save you from having to pay out of pocket for repairs or replacement.

5. You can build good credit that makes other transactions cheaper

Finally, if you use your credit cards responsibly, this will help you increase your credit score. A good credit score can make many other transactions much cheaper. You may be offered a lower rate on a car loan or mortgage loan, for example. Or you might be able to sign up for a cellphone or utility services without having to make a large deposit.

For all of these reasons, credit cards can save you money. Just be sure to use them wisely, pay them on time, and don't carry a balance.