Credit cards used to give off the impression that if you were using one, you didn’t actually have the money to make the purchase, or at least that’s what it seemed when I was a kid. In actuality, using a credit card has plenty of benefits over a debit card that it can actually be smart to use it on every purchase. The only part where things get a little tough and takes plenty of discipline is now that you are using your card to rack up the balance, you need to pay off the full statement balance by the due date, otherwise if you carry over a balance to the next month you start to be charged interest, which depending on the APR on the car, could be upwards of 16%. If you’re able to keep the spending until control and pay off the full balance each month, then using a credit card for every purchase is definitely financially smart.
There are those that put credit on the backburner, but the longer you hold off on building your credit, the less you are able to get approved for a mortgage, car lease, insurance, and even some employers are looking at credit history now. The more you can charge up each month and pay off could start to increase your credit limit, which then you would have a solid payment history and increased credit availability compared to debt, which would raise your credit score and help get you to the most attractive rates on the market.
It’s pretty often these days that you hear of information getting compromised, whether it is your card getting skimmed at the gas pump, department stores getting hacked, or even worse like recent, having Equifax have basically half of the country get hacked. While a credit card won’t save you from that, but what it will do though, is if your information is compromised and someone goes on a spending spree, at least the funds aren’t taken from your bank account. Sure, you can dispute the charges with a credit or debit card, but at least you don’t have to worry about your bank account getting cleaned out while you wait for the money to come back.
One nice thing about charging on a credit card is that you don’t have it taken directly from your bank account with a purchase, and the balance will not be due until the following month (depending on when your statement cycle closing date falls on), so it does give a little wiggle room if you need a paycheck or two to pay off the balance before you get hit with interest.
No Hold on Account
By using your credit card over a debit card when you book a hotel room or rental car, you don’t have to worry about a hold on your account for incidentals while you are renting, and that by the time your statement is due the following month, it would have fallen off and you wouldn’t be responsible. With a debit card, you’d be out the money while you wait for the hold period to end, while even sometimes the company will put an even larger hold on your account just by using a debit card because they know there may be limited resources in the account.
Rewards are the Best!
Now what I’ve enjoyed about using a credit card for every purchase the most is when it comes to the rewards. I was using a card that collected 1-3% cashback off each purchase, and once a year I would receive a check in the mail with the year’s total. When it was in the hundreds, I thought to myself, why don’t I just use this for every purchase and see this total climb even more. Now I’m not talking about making random purchases you don’t need just for the rewards, but if you think about the necessary purchases that you would be making anyways with a debit card, but using a credit card instead, you are earning free money on those purchases that you would be missing out on otherwise.
Sometimes, depending on the card, you can find extra perks built in that you may not have even noticed. I had trouble with no-fault damage to a rental car that I had rented without the extra insurance, but come to find out my credit card covered this extra insurance and fortunately I was off the hook on what could have been a hefty charge otherwise.