Using a credit card is a big responsibility. If you’re not careful you could create a downward spiral into debt that could take years to get out of, if you begin a trend of not being able to pay off the balance by the statement due date, and start paying interest. Now that is not meant to scare, it’s just a heads up, but in fact using a credit actually has plenty of benefits and can be smart on your personal finance if it’s used correctly.
It’s often these days that you hear about cards getting hacked at the gas pump, large retails scores having their information compromised, or even recently, where Equifax had basically half of the entire population possible be exposed. While you can’t protect yourself by using a credit card, but what you can do is save your bank account from being wiped out if your information if compromised, and at least while you dispute the charges you don’t have to worry about being out of money. At least with a credit card the charges will fall off by the time the next statement is due.
Free Rewards Money
Rewards is really when I got hooked on using a credit card. I had signed up for a cashback card, earning 1-3% cashback (depending on the type of purchase), so when I received a reward check for hundreds of dollars the next year, I thought it was time to devote every purchase to using a credit card instead of debit. Now I mean necessary purchase that I would be making anyways and not just charging up the card to earn rewards. By doing this you risk yourself getting into debt pretty quickly, not being able to pay off the balance and start paying interest.
Charging, paying off, leaving your credit available open is a great way to build credit with a solid payment history and maximizing your available credit against no debt, so your credit score will begin to rise, whether you are new or have an existing account. This is important because in order to take advantage of the best rates on the market, you need to have a high credit score. Depending on the size of the loan, even one percent of a home purchase interest rate could save you thousands of dollars in interest a year.
Don’t Have to Worry About a Hold
Credit cards make it easy to book hotel rooms and rental cars. Sure, you could book with a debit, but you would receive a huge hold on your account, locking up a significant amount of money until the hold is released, sometimes a week after you have returned from using, and probably a higher hold than what it would be on a credit card anyways. At least with using a credit card to book, when they do place a hold, it will come off by the time you need to pay that statement anyways, even if it does take a week or two to come off, you’re still not on the hook.