If you haven’t noticed this, there are numerous new ways to pay for stuff. Just several decades ago, we paid cash for almost everything and credit cards were considered to be a novelty. However, today we rely a lot on plastic because of their security, the rewards they offer and as a short-term loan. Whether we like it or not, it’s just easier to use a credit card than to pay cash. Of course, the problem with relying solely on credit cards, is this makes it easy to fall into the trap of irresponsible spending, which can end up costing hundreds of dollars in interest charges. An article I found recently on the MSN Money website offered some very good reasons to stick with credit cards.
They limit your liability
Credit card fraud and identity theft are rampant these days. One of the good things about a credit card is that it caps your liability – usually at $50. So if you lose your card or its stolen or if someone steals your identity, it won’t cost you thousands of dollars. For that matter, if your card is stolen or lost or if you’re the victim of identity theft, the credit card issuer may not even charge you the $50.
Credit cards are easier to use
If you’ve ever stood behind someone in the checkout line who is writing a check for his or her purchase, you know how time-consuming this can be. In comparison, with a credit card it’s one swipe and you’re done. In most cases with a credit card you won’t have to show any identification as you would with a check – which makes the transaction even more time-consuming.
Credit cards help you track your spending
Credit cards provide good documentation as to how and where you’re spending your money. This can be especially important if your budgeting. But even if not, it can be valuable to know where you’re money’s going as this makes it much easier to reduce your spending on nonessential items.
Credit cards come with insurance
Most credit cards have an insurance component. For example, if you were to buy a product online and didn’t receive it or if it wasn’t what you thought you were purchasing and the merchant refuses to refund your money, one call to your credit card provider should fix the problem. Most credit cards also provide insurance coverage when you rent an automobile, which can save you money vs. having to pay the rental car company for coverage.
Many credit cards now come with rewards
Credit card issuers face intense competition from one another. As a result, most of them now offer credit cards that come with rewards. This can be in the form of cash back, airline miles or points. For example, one of my cards is paying 5% cash back on certain purchases for the next quarter. I’ve already earned a $50 gift card and am nearing a $100 gift card. If gift cards don’t interest you, you might be able to use your points to get a free hotel room or an airline ticket.
Credit cards can help with your credit score
Your credit score is calculated using five components. One of these is how you’ve used credit. If you have credit cards and use them sensibly – which means paying off your balances each month – this can have a very positive effect on your credit score. So, too, can be keeping your balances low vs. the amount of credit you have available. This is due to the fact that another part of your credit score is based on your debt-to-credit ratio or what’s called credit utilization. For example, if you have total credit limits of $10,000 but have used only $1000 of it, your credit utilization ratio would be 10%, which is a very good one and should help boost your credit score.
Click here to read the complete article on MSN Money