It used to be that using a credit card could give off the perception that because you’re charging, you don’t actually have the sufficient funds to make the purchase. While I suppose that could be true for some, and for those may have gone down the financial path to debt, but for those that can use a credit card responsibly by paying off the entire statement balance without carrying over to the next month and being charged interest, using a credit card can not only make solid financial sense, but should be used for every purchase. As cash continues to be a currency of the past, you can use a credit card and feel confident that you are staying on top of your finances, as long as you can curb spending and save appropriately for not only an emergency, but for one day when you finally do walk away from the grind.
Builds Up Credit
Whether you have applied for a mortgage or received the terms for your current credit card, you know that your credit score not only decides your approval or denial, but also at what interest rate you are approved for. By spending on your account and paying off every month, while keeping your credit utilization low, you can continue to build credit so you can take advantage of the most favorable interest rates on the market and ultimately save the most money every month.
Easy Way to Track Purchases
When it comes to getting spending until control, if you are using credit, cash, or debit, not to mention multiple cards, it can be easy to track just how much you are spending in an entire month. By consolidating to one credit card, you can easily track purchases by looking at last month’s credit card statement. From there you can put expenses under a microscope and start to take note of those expenses that were necessary and those that probably could have been avoided. There, you can add up all of the unnecessary purchases and see how much you could have had leftover for your emergency fund or retirement savings.
Protection Against Fraud
These days you just never know when fraud can occur. Whether it’s leaving your card out for too long when paying a restaurant tab, swiping at the gas pump, or even using at a retail store where account information could have been breached, it can be difficult to protect from all areas of impact. With a debit card, if fraudulent charges occur they will be removed from your bank account until they can be reversed, whenever that will be, but at least with a credit card, while you dispute the charges you will never be responsible for the charges, even if they are currently in a ‘pending’ status.
While it can be argued that debit cards are also accepted everywhere, the difference is that when you use a debit card when checking into a hotel or booking a rental car, there can be a significant hold on the card that will be removed up to a week after checkout. With a credit card, much like the charges are in a holding pattern when disputed, the same goes for any hold that is applied to the card, as you would not be responsible for paying in the meantime.
The Rewards Add Up Quickly
Probably the best reason to use a credit card for all purchases would be because of the rewards. By even making the purchases you were going to make anyways, you can earn points that can be redeemed for gift cards, hotel rooms, or airline miles, not to mention even a cashback check once a year. If you can stick to only the necessary purchases, even using a credit card for these monthly bills, food, gas, spending, you can earn hundreds of dollars a year that would have otherwise been left on the table if using cash, debit, or a credit card without rewards.
Grace Period to Pay Back
With it’s a plus if you can keep spending until control and payback what you charged, it’s also a downfall if you continue to spend. By having a grace period, you save up a couple of paychecks before the statement balance is due from all of the previous month’s spending. Much like any credit account, not only are late payments thirty days late are reported to the credit bureaus, even being a day late can result in a late fee or an interest rate spike that could increase monthly payments going forward.