Mention the term credit card and depending on who you’re around, you could get quite the range of responses. You have one side that’ll be on the extreme of churning credit cards all the time to earn rewards to those on the other side who swear them off with the belief that they’re a blight on society. Certainly, if you’re struggling with credit card debt now, or in the recent past, then credit cards probably are not the best for you, but if used as a balanced approach to managing one’s finances I believe there are a number of benefits to be found in using credit cards. The key is knowing what those benefits are and using them if appropriate.
Who Doesn't Like a Free Trip?
Of course, one of the best perks of using credit cards is the ability to earn free rewards points that can be used on a wide range of things, from cash to free airline miles. My wife and I just started churning credit cards a little bit this past year and I can attest that our ability to earn enough for a free trip does make it enticing to continue to churn. What if earning free trips isn’t your thing? That is no problem at all as many credit card companies will give out rewards such as free cash or gift cards that can be used at a variety of different retailers. I know I may sound like a cheerleader for churning credit cards. I do like the benefit, but if spending is an issue then no free trip is worth racking up all sorts of debt in the long run.
Protect Your Purchases
A more practical benefit to using credit cards is that they offer us as consumers protections against a variety of things. Have you ever bought something over $50 only to find it to be defective when you get home, or have a dispute with a retailer over erroneous charges? If you have, then using a credit card as opposed to cash or debit card avails you to the Fair Credit Billing Act which can potentially limit your maximum liability to $50. Beyond that benefit, some credit card issuers will even extend warranties on certain items. We’ve never had to use that ourselves, but I can see how that would be awfully helpful if the computer we bought last year decides to break down on me in the next few months.
Credit Cards Can Stretch Your Budget
I know it might seem counterintuitive, but if you use them wisely credit cards can help you stretch your budget at times. It’s less applicable in today’s interest rate climate, but it can allow you to play the float between purchasing an item and actually having to pay for it. A bit different, but similar, you can see this when you travel and need to rent a car or stay at a hotel. If you use a debit card, they’ll place a hold on your card for a certain dollar amount, meaning that you can’t access that money, however with a credit card your funds are accessible right away. True, the hold falls off when you leave the establishment, but many find it inconvenient to have their cash “frozen,” something you will not encounter when using one of your credit cards.
What other benefits can you think of when using credit cards? Do you churn to earn rewards?
This post was originally published on September 18, 2013 and updated on September 16, 2019.