A credit card is a suitable financial product that helps you build credit every time you use it for a purchase. Credit card users will make regular payments towards the debt they racked up from a big purchase, or they’ll pay off their balance entirely.
When used responsibly, you’re better off paying with credit and keeping cash to a minimum for the following reasons.
The Top 7 Advantages of Having a Credit Card
There are plenty of credit cards available that offer different features, like low interest rates. If you’re based in Australia, you can compare credit cards with iSelect based on the features they offer. Americans can still use VISA, MasterCard, and AMEX in the land down under.
1. Cash Back
Cashback credit cards earn you a small amount of money when you make a purchase. Some cards will offer 2-6% cashback on select purchases, but offers that are on the higher end of the scale typically have annual spending caps.
Try to find a cashback credit card that charges minimal interest rates, so you can keep earning rewards without losing all of it on fees.
2. One-Time Bonuses
To incentivize people into signing up for a credit card, banks will offer a one-time bonus after they’re approved. These rewards are typically monetary and usually range from $150-$1000, but some credit cards can do much more.
Other cards entice applicants with bonus Air Miles or reward points that can be redeemed for gift cards, travel, merchandise, or statement credits.
3. Frequent-Flyer Miles
Most of us will use credit cards for large purchases, like travel. If you’re already someone who enjoys going to exotic places, you’ll get a lot of use out of a frequent-flyer miles credit card.
Cardholders will typically start to earn miles at a rate of one mile per dollar in net purchases, but frequent flyer card introductory bonuses are often enough to give you a free domestic flight.
4. Reward Points
Besides saving up for a ticket on an airplane, many other credit cards will allow cardholders to earn one or more reward points per dollar spent that can be used on other products. From hotel chains to clothing retailers, your reward options are almost endless.
However, you will need to find a card that fits your spending patterns, so you won’t miss out on your earning potential.
When you pay for something with your debit card, the money is gone right away. Usually, that isn’t a problem, but what if you’re a victim of fraud? Regardless of the fraudsters were untrustworthy contractors or faceless hackers, it’s a lot harder to get your money back when it’s stolen from your debit card. With credit, you can issue a chargeback to potentially see it return.
6. Universal Acceptance
You can’t always pay for certain purchases with your debit card. For example, if you want to stay in a hotel room or rent a car, you’ll be out of luck.
You’ll also find it challenging to pay for something online unless you use another service, like PayPal.
Also, when you’re traveling in a foreign country, merchants won’t always accept your debit card, but they will accept credit.
7. Building Credit
The biggest reason why you’ll want to start using a credit card as soon as possible is to build credit. Without credit, you won’t be able to take out a loan, a mortgage, or sign up for certain services. You can find out more about how your credit card and credit score work together here.
Some landlords will turn you away if you have bad credit, so it’s infidelity helpful to have and build credit. Even a secured, low-limit credit card will help you get started.