Did you know that 79% of consumers have at least one credit card? If you’re part of the 21% that doesn’t, you might be missing out
Credit cards come with loads of benefits compared to your average debit card, from cash back to travel points. As long as you pay the credit card’s entire balance each month, you won’t have to pay interest, either. Because of their incentives and fraud protection, many consumers use a credit card instead of a debit card.
Reasons to Use Your Credit Card
From protecting your finances to establishing a credit history, there’s a long list of reasons why you should use a credit card. Nearly everyone can get a credit card, including students and consumers with low credit scores.
To Earn Freebies
Many consumers enjoy various freebies that credit cards offer – cash back, airline miles, and hotel points, to name a few. Cash back typically ranges from 1 – 5%, depending on the spend. For example, the Chase Freedom Unlimited® gives cardholders 1.5% cash back on almost every purchase.
A significant number of credit card companies offer generous sign-up bonuses. With the Chase Sapphire Preferred® Card, you can get 100,000 bonus points provided you spend at least $4,000 in the first three months.
Credit card companies that offer cash back give you the option to receive the cash directly or apply the cash back toward your statement. No matter the credit card you use, don’t get too caught up in the rewards aspect of the card. Not making payments on time or racking up a large balance will cost you, and those expenses will outweigh the rewards.
To Better Protect Your Finances
When you use a credit card to make a transaction, it’s much easier to dispute the charge. Depending on the credit card type, you have 60 to 120 days to file a chargeback against a merchant. And like banks, credit card companies alert you if they detect fraudulent activity on your account.
It’s a lot more difficult to recoup money stolen from your checking account. You typically have to go through your bank or the merchant. Suppose someone stole $2,000 from your checking account. If you now only have $500 left, you might not be able to make your rent payment. If the thief stole your credit card, instead, you would not be out the money.
To Protect Yourself from Merchants
Imagine pre-paying for a rental car only to find out that the rental company car went out of business the day before your reservation. Tough luck, right? You can file a chargeback with a credit card if you don’t receive the service or goods that you paid for. This protection extends to broken merchandise and also unauthorized charges.
To Establish Credit
Inarguably one of the most important reasons to use your credit card over a debit card is to establish credit. If you have no credit history, it’s nearly impossible to get a loan. It’s even challenging to get a non-secured credit card without any credit history. After using a credit card for one year and making timely payments, it’s not unheard of for your credit score to increase by 100 points.
Just as you can build your credit, you can also hurt your credit. If you miss payments, your credit score could drop up to 100 points or more. Also, every time you open a new line of credit, the credit card company will make a hard inquiry. A hard inquiry will stay on your credit report for two years. If you apply for too many credit cards in one year, don’t be surprised to see a significant drop in your credit score.
A Glance at a Credit Card Instead of a Debit Card
As you can see, there are many reasons to use your credit card over a debit card. Many people talk about credit cards as a negative thing, but that’s not the case. If you’re wondering why you should use a credit card, consider the excellent fraud protection, opportunity to build your credit, and the chance to earn rewards.