Credit cards often get a bad rap, and many times rightfully so. Some consumers use credit cards in ways that are extremely harmful to their personal finances. However, there are many benefits to using credit cards in a disciplined manner.
Disclaimer: If you struggle with running up credit card debt, or have stopped using credit cards because you were tempted to spend more money while using them, the benefits listed below should be ignored.
Benefit 1: Initial signup bonus
Many credit cards offer huge bonuses at signup. Many airlines have credit card signup bonuses that can translate into free round trip flights. Hotel chains offer points toward free nights. Some cards even offer a cash incentive with signup bonuses ranging from $100-$500 dollars. Some people have even turned signing up for credit cards into a hobby that allows them to travel domestically and internationally and have flights and hotels paid for by credit card signup bonuses alone. Entire blogs have been written about ways to get all kinds of free stuff by signing up for credit cards.
Benefit 2: Ongoing rewards
Nearly all credit cards offer some sort of reward every time you spend money on the card. My favorite credit cards are the ones that offer a small percentage of your purchase back as a reward for using the card. Many cash back reward cards offer 1%-1.5% or even more as an incentive to use the card. Let’s say your family hypothetically spends $20,000 a year on expenses that could be paid for with a credit card. At 1% back that could add up to $200 a year in cash back to spend on anything!
Benefit 3: Protection from fraudulent use
Current federal law limits your maximum potential loss from the fraudulent use of your credit card at $50. Compare that to the federal maximum of $500 for using a debit card. The potential loss from carrying around cash in order to pay your daily expenses could even be significantly higher.
Credit cards are definitely not for everybody. However, those who use their cards responsibly can benefit from great rewards and experience greater protection from fraud.
What benefits have you received from spending with a credit card?