Benefits of Credit Card Purchases
Good financial management will tell you to keep credit card usage to a minimum. Indeed, only use the cards for emergencies. The thinking behind it is to achieve financial prudence.
When you use cash or debit cards, it confines you to the money you have. A credit card is, after all, alone that comes with an obligation. And that is to ensure you pay back any money you use. We cannot argue that such advice makes a lot of sense.
Statistics show that as of 2020, over 80% of American adults had at least one credit card. The average American has at least 3.84 credit cards. The number of credit card purchases within the same year was 27%. It signified a 3% increase from the previous year.
Read on to find out why using your credit card is not a bad idea.
Uncovering How Credit Cards Work
Credit cards provide a convenient way to make purchases, even without cold hard cash. The issuers extend credit facilities, which you need to pay back with interest.
Like any loan, the institution will place a credit limit. You can only spend up to that amount unless you have signed up for over-the-limit protection. In that case, you can exceed the limit but may pay a fee or higher interest rates.
So, what is the difference between a credit and debit card? A debit card is not a loan. There is an automatic deduction of money from your bank account if you use it to make a purchase.
The other difference between the two is the impact on the credit score. Since the debit card is not a loan, it will not affect the credit score. It is the perfect start to how to get an 850 credit score.
The same does not apply to the credit card. The credit reference bureaus look at your payment history, credit card usage, and credit age to calculate your score. Any inquiry for new cards and the credit mix also contributes.
Keep a close watch on your credit report. Any mistakes or errors in the data input can work against your efforts to achieve a perfect credit score. Some companies offer cheap credit repair services. They will correct any inaccuracies in the report.
Credit repair professionals can also remove negative items at a negligible cost. Top-rated credit repair companies can even help with debt repayments and advise on how to secure your financial future.
Now, let’s look at why using your credit card for purchases makes sense.
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Availability of Credit Facilities
You may not always have ready cash when making a purchase. The credit card offers you credit facilities that you can pay back later.
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Rewards, Bonuses, and Other Incentives
Credit card issuers throw in a lot of incentives for customers. Every time you spend any money, you get points that you can redeem at a later date. You can use the points for travel, restaurants, retail, or even gift cards.
Cashback incentives are another winning point. Customers get back the percentage of the money every time they buy anything using their credit cards.
Other incentives include insurance coverage, frequent flyer miles, and discounts. Credit card companies get into partnerships with airlines, hotels, etc. That way, they can throw in some really attractive offers to customers.
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Credit Cards Can Build Your Credit History
Good credit history can open so many doors. With an 850 credit score, accessing loans will be easier. You will enjoy better interest rates, which would not be the case with a poor credit score. Further, some job positions require someone with a perfect credit score.
As we stated, the credit reference bureaus use your credit card information to calculate your score. Long-term credit card usage will also go towards your credit history, which is another critical scoring factor.
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Fraud Protection With Credit Cards
Let’s say a thief steals your debit card and makes purchases. Automatic deductions from your account mean you lose cash immediately. You may have to go through a lot of hassle for a reversal or restoration of money to your account.
With credit cards, fraudulent purchases will not affect you. Technically, the thief is using money that belongs to the credit card company. The Fair Credit Billing Act (FCBA) protects customers from total liability of any costs arising from fraudulent charges. You are only responsible for up to $50 if you report the activities within 60 days.
The act covers other areas, including calculations, wrong billing amounts, chargers without proof, and much more. It goes back to our point of keeping a close eye on your credit report. You have a right to access one free copy every year.
The other option is to hire an affordable credit repair company to keep track of your credit report. They can identify and dispute the mistakes on your behalf.
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Global Acceptance of Credit Cards
Let’s say you have to travel to another country. One of the things you will do is look for a forex Bureau. You must convert your currency into the local one. That would mean walking around with large amounts of money, which can be dangerous.
Debit cards are also not easy to use in foreign destinations. The most significant inconvenience is you may need to get the go-ahead from the financial institution. Some have specific rules on overseas debit card usage. You must also deal with other factors like currency conversion rate, ATM withdrawal charges, and foreign transaction charges.
With credit cards, you don’t have to worry about that. What you get is global acceptance for a wide range of services. Renting a car, booking accommodation, dining, and much more is possible without cash in hand.
Final Thoughts
Credit cards offer a lot of advantages to users. We have shared some of the major ones above. The best advice we can give is to be mindful about how you use the credit facilities. Keep up with your repayments so that you do not affect your credit score.
Tracking your credit report is also essential. Top-rated credit repair companies can provide all-year-round monitoring. They will also identify and correct any mistakes. That way, you can stay on track to achieving an 850 credit score.
