When we talk about financial stability, personal finance experts will always encourage us to prevent using credit cards—and for a good reason. Many credit card users often end up in debt and financial ruin.
However, contrary to that belief, credit cards are great for any financial transactions if used responsibly. This blog will explain it by discussing some of the benefits and rewards of using credit cards. But first, let’s examine them more closely to see how they operate.
Understanding Credit Cards
A credit card generally lends you money to make purchases and pay your bills. It’s like a short-term loan, in a sense, but with perks and rewards.
You use the issuer’s, or credit card company’s, money in every transaction you make using a credit card. You must return it within the deadline as a result, depending on when you made the purchase and your payment cycle. High interest rates will result if this is not done. You will have a grace period of at least 21 days before interest on your purchases starts to accumulate, as required by law under the 2009 Credit Card Act.
Also, the credit limit on your credit card will be determined by your credit score, income, and account history. You may be able to better manage your money as a result.
Let’s move on to the benefits of using credit cards now that we’ve understood this, starting with incentives.
Credit Card Rewards
The ability to earn rewards just by using credit cards is one of its biggest advantages. You can also receive several benefits, each of which is connected to a certain credit card. These are a few instances:
Cashback
Cashback is a popular incentive type that provides you a portion of every eligible purchase you make back. For instance, you would receive $5 in your reward balance if you used your rewards credit card to purchase a $100 item that is eligible for 5% cashback. When making regular expenditures like petrol, groceries and dining out, a cashback rewards card is the ideal option.
Miles Or Travel
A credit card that earns miles would be excellent for you if you frequently travel to seek out and experience new things. With this card, you may gain benefits for eligible travel-related expenditures including flights, cruises, car rentals, lounge access, and more. To help you save even more money, certain travel credit cards could also provide non-travel bonus categories.
Points
Certain reward credit cards can give points in addition to miles and money. However be aware that the methods for obtaining and using these points may differ from card to card. It may function like a credit card with miles or cash back. Hence, it’s crucial to conduct in-depth study to understand how the point system functions or whether there are any restrictions on using your rewards.
Other Credit Card Benefits
Building Credit
The only method to establish credit is to use a credit card, as implied by the name. That won’t actually assist because your debit card won’t be included on your credit report. So why do people establish credit? You may inquire. As a result, you could be able to qualify for bigger loans, mortgages, and other financial products. Also, it may enable you to obtain better terms and interest rates. Yet, you must use a credit card properly in order to keep a high credit score.
Widely-Accepted Mode of Payment
You may use a credit card to make purchases anywhere you travel, even if you don’t have much cash with you. Furthermore, certain businesses choose credit over debit or cash. It’s easy to understand why. Because it’s simpler to charge credit cards when consumers damage a rental automobile or other property, credit cards are frequently more practical.
A Convenient Option For Emergencies
In an emergency, credit cards may be a very useful tool. When you need money, they may give it to you instantly. It may be used to cover unexpected costs like medical bills, auto repairs, and other bills. Moreover, credit cards may let you choose not to make a complete payment right away. Spreading out the cost of your purchase across a number of months can make it easier for you to manage your money in the event of an unexpected expense.
Safety And Protection
The fact that credit cards provide a range of protections to safeguard cardholder payments is another advantage. Purchase protection is first on the list. Most credit cards offer complete refund for things that are damaged, lost, or stolen. Moreover, companies occasionally provide extended warranties on certain items that may go beyond the manufacturer’s warranty, providing you with an extra year or two of coverage.
Credit cards can also shield you from theft and unlawful purchases. They may also reverse the charges and even provide you a new card when fraud occurs, in addition to an alert system that alerts you when suspicious behaviour on your account. Just inform the card issuer of the problem, and they will take quick action to fix it.
Last but not least, the majority of credit cards include insurance like rental vehicle or trip insurance, which can provide you with coverage in the event of an accident or other concerns when travelling.
The Bottom Line
In summary, credit cards are a useful tool for controlling your spending and budget. Because of this, it’s critical to comprehend how they operate and make responsible use of them. Knowing the benefits and drawbacks of credit cards can help you make the most of them while managing your money.