If you’re at the beginning of your financial journey as an adult, you may not be sure of where to start. Staying on top of your needs and costs can feel like a full-time job and sometimes you’ll need a little extra help to make it through some of the financial hurdles that come your way.
Over 150 million Americans have credit cards, with the average American having 4 at their disposal at any given moment. There’s a reason Americans love using credit cards: they come with so many benefits when trying to map out your financial life.
If you’re not familiar with the many benefits of credit cards, you should be. Understanding how credit cards can help you to improve your life and financial standing can be essential as you move through the world. What benefits should you be familiar with, and which should you prioritize when getting your own card? Read on and we’ll walk you through the specifics.
1. Build Credit
When you use a credit card, the money that you use is not immediately taken out of your own bank account. Instead, the credit card provider covers the purchase for you. That total amount is put on a bill that you then pay back later, typically at the end of a monthly billing cycle.
In this way, a credit card can be seen as a micro version of going to the bank and taking out a loan. You are technically borrowing money and paying it back later. This is a good practice to get into, as borrowing money can often be an important part of life’s biggest moments.
The more you use your credit card, the more you’ll build what is known as your credit score up. Your credit score is a 3 digit number that ranks how trustworthy you are in the eyes of credit lenders.
The more you spend and pay back your credit card bill on time, the higher your score will be. Should you miss payments or fail to pay back your credit provider, your score will go down.
It’s important to build up a strong credit score while you’re still young. You’ll need a strong credit score should you want to take a loan out from the bank later on in life: to start a new business, to buy a house, or simply to cover costs that you don’t have the money for at the moment.
The major benefit of opening a credit card is to build your credit profile up. As long as you use your credit card responsibly, you should have no trouble doing so. The benefits to your future after that should be numerous.
Plus, you’ll already be leagues ahead of other Americans. Many are unaware of their credit score and what it means for them.
2. Earn Rewards
The other element that most people love about credit cards is that they offer some seriously cool rewards. Credit providers are competing for customers and want to bring in as many people to their service as possible.
In order to incentivize consumers, credit cards often offer a number of rewards to those who might be willing to sign up for their card. Most often, you’ll find cash-back cards and travel cards.
Cash-back cards provide money in return for the use of the card. Often, you’ll find credit cards that give 1% cashback on all purchases, and higher percentages on specific purchases during specific times. This provides an opportunity to save money in a way that one wouldn’t if they were paying via another form.
Travel cards take your purchases and give you points towards airfare. The more you spend, the closer you come to unlocking free flights to any destination you could dream of.
Many credit card companies also further incentivize new customers by providing exciting sign-up offers and bonuses. Often, the rewards that can be garnered during the first year of a new credit card can be quite exciting.
There are some incredible offers out there when it comes to new credit cards, so it’s something you’ll want to take the time to explore before deciding where you want to open an initial account.
3. Safety & Protection
Another major benefit of using a credit card to make a purchase? It’s far safer than most other forms of payment and for more reasons than one.
Think of a credit card as compared to a debit card. When you use a debit card, the money is taken directly from your bank account in that moment. If your debit card was to fall into the wrong hands, you could see your account depleted quickly.
This wouldn’t happen with a credit card. If a credit card is stolen, you’ll have time to dispute charges and rectify the situation before the money ever actually leaves your bank account.
Credit card companies also have a number of programs in place designed to help protect their customers from fraud. They might flag any purchase that doesn’t match your typical purchasing cycle or alert you to purchases made on your card that total over a certain amount.
Thanks to the Fair Credit Billing Act, the most you’ll be required to pay for purchases made on your card by thieves is $50. The protections for debit card owners are much more limited. If you’re concerned about safety and fraud protection, a credit card company is going to provide much more of what you’re looking for.
That’s one of the major benefits of a credit card over the other existing forms of payment out there.
4. Better Spending Analytics
We all could do a little better at spending and saving, don’t you think? If keeping track of your shopping and establishing better purchasing habits is tough for you, credit cards can help.
Unlike other forms of payment, most credit card companies offer analytics programs that can be used to break down your spending over the course of a monthly bill. You can see where you’re spending money and what areas you are spending the most in.
Often, a credit card company will break down your spending into categories like housing, shopping, eating, entertainment, and so forth. You can even go into your settings with most providers and set certain budgets for these various categories.
When you get to a certain spending limit for the month, your provider will notify you and you can make adjustments to your spending based on this. This is a great way to help work you towards better spending habits and ensure you don’t go overboard with your spending.
These analytics are easy to personalize based on your own spending habits, desires, and goals. You can dive in and perfect your own spending and come out the other side a better, more well-rounded shopper.
If you didn’t know how to use a credit card, this is a special advantage to get familiar with.
5. Convenient and Easy to Use
A credit card is a slim piece of plastic that can fit easily into your wallet without much thought. It’s much easier to use and more convenient than having to carry around cash all of the time.
Almost all retail and businesses around the world accept credit cards, meaning there are almost no instances where you’ll run into trouble trying to make a credit card purchase.
Even in a worst-case scenario, if you lose your wallet, you can always cancel your credit card and request that a new one be sent. This won’t be the case when you lose your wallet that has cash inside.
You can also use a credit card to easily shop online, streamlining the purchasing process even more. Credit card companies have made it easy to use their product in just about any possible purchasing scenario.
Most outlets now allow you to save your credit card information directly into various payment systems, meaning you can click and buy essentially without any direct effort needed.
Credit cards can now be directly used around the world in other settings as well. For example, in New York City, you can now directly enter a subway station by tapping a credit card as opposed to having to purchase a separate metro card.
6. Pay Off Balance Over Time
Another major advantage of working with a credit card as a form of payment? You don’t have to pay it all back at once. When paying off a credit card, you have the opportunity to pay off your balance in pieces as opposed to all at once.
Of course, it would be beneficial to pay off the entire balance at one time if you have the money to do so. This will help to avoid any interest or fees. However, if you don’t have the money in hand for the purchases you need to make but still need to make them? A credit card can be a hugely helpful tool.
For a small amount of interest, you can make smaller payments and work towards your overall money owed. There are also a number of credit cards that come with special offers in terms of these fees for the beginning of the card’s life.
Plenty of credit card providers offer 0% interest on all purchases for a period of six months to a year. During this time, a person could pay back their balance in installments at no additional cost – a true value! No interest will be incurred.
One should be careful when it comes to paying their balance back in pieces, as credit card debt is a real issue that impacts many Americans. However, if you can be smart about when you wait to pay, you can take advantage of this great benefit.
7. Grace Period
Another less talked about the benefit of credit cards is how their processing time can better your relationship with vendors. If you pay a vendor in cash or with a check, that money can be taken out of your account in next to no time.
With a credit card, it’ll be much longer before the money actually exits your bank account. This window of time can be hugely advantageous when it comes to working with vendors.
Let’s say a professional provides you a service and you pay with a credit card at the end of the job. However, the day following, the work that they’ve done comes undone and you realize the job was actually not done as it should be.
If you had paid in cash, you would have to rely on the honesty and reliability of the vendor to come back and fix the job, as they would already have your payment in hand.
With a credit card payment, you retain some of your negotiating power over the vendor.
If the job goes south, you can threaten to dispute the charge and not pass the payment over to the vendor. In this way, you can take advantage of a small grace period and force the vendor in question to be a little more honest.
The Many Benefits of Having a Credit Card
If you’re expanding your financial capabilities, the best thing you can do is get familiar with the many benefits of credit cards. There are so many benefits of having a credit card that the average consumer should try and get familiar with.
The above are some of the most important and most beneficial. If you’re on the fence about opening a credit card account, these benefits should push you over the edge towards making the leap.
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