Only 37% of the American population uses a credit card as compared to the 53% that uses a debit card. This is possibly because credit cards can have high interest rates if you fail to meet up with your payment. Both cards have similar functions but a few differences make the credit card stand out.
A credit card comes with a credit limit which is based on your income and credit score. To understand the benefits and necessity of a credit card, here are some of the things you need it for.
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1. Building Credit History
Credit cards are one of the best ways to build a good credit history. By paying your bills on time with credit, you’re building a positive credit history that can help you obtain lower interest on future loans. This is because your consumer credit score is tied to your ability to pay back borrowed money.
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2. Foot Large Purchases
Large purchases are inevitable. No matter how much you plan, they could spring up from time to time. Credit cards provide an easy and convenient way to pay for these large purchases. No matter how large or urgent these purchases are, you can simply pay for them with a swipe of your credit card.
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3. Earn Rewards
Most credit cards offer rewards and bonuses because credit card companies are in fierce competition. They offer handsome rewards to entice users to use their credit cards. With one of these credit cards, you can earn a range of rewards such as points, cashback or miles. The type of reward you’ll get depends on the kind of spending you make. For some credit cards, you can also get a welcome or referral bonus. Make sure to check all terms and conditions.
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4. Protection From Fraud and Scams
Digital scams are becoming prevalent, with your debit card details, fraudsters can access your account and clear your funds. But, you don’t need to worry about this with a credit card as it’s not connected to your account and you won’t be liable for fraudulent charges if your card gets missing or stolen. A credit card also protects you against fraud by giving you chargebacks back in the event of unauthorised use or a purchase/service problem.
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5. Make Payment
A credit card is not the only card you can use for online payments but it’s a great alternative for paying your bills. You can just pay immediately with your card if you need something and pay back later by the end of the month. You can obtain short-term credit anytime you need it and pay it back later without interest. But there’s usually a high interest if you don’t pay back on time. Some establishments also require credit for things like hotel reservations, car rentals and some subscriptions like your gym membership.
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6. Track Purchases
With your credit card, you can easily access your credit history statement. This makes it easy for you to track your spending and manage your finances better.
