18 Ways Your Credit Card Can Be Your Best Financial Friend

6 min Read

Aum racha / iStock.com

Aum racha / iStock.com

For a piece of plastic, a credit card can be a very powerful thing. Not only does it make shopping seamless, but many credit cards also come with a number of perks, including ways to save money on purchases and added consumer protections. As long as you are a responsible credit card user without outstanding debt, there’s no reason why you shouldn’t use your credit card to pay for almost everything.

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You Can Rack Up Reward Points

Why not get rewarded for the purchases you would be making anyway? Many credit cards allow you to earn rewards points for every dollar you spend, which can then be redeemed for travel rewards, gift cards, merchandise and more, depending on the card.

It Helps You Build Credit

Your credit score is based on a number of factors, including your repayment history, the length of your credit history and your credit utilization. Responsible credit card use — which includes making on-time payments, keeping credit cards open for long periods of time and only using a small percentage of your available credit — will help your credit score to rise.

Get Credit Card Perks

You Might Be Able To Get a Sign-On Bonus

If you just opened a new credit card, making purchases with it can earn you a major sign-on bonus. This could be a cash bonus, extra rewards points or extra cash back.

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It Protects You From Fraud

Fraudulent purchases made with your credit card can be easily disputed. Things aren’t so seamless with debit cards when the money is taken from your account and must be recovered. Using credit cards can give you that extra peace of mind from knowing that you won’t be out any money in the case of theft or fraud.

They Make It Easy To Track Your Spending

It’s hard to keep track of payments you make in cash, but when you pay for purchases with a credit card, it’s very easy to see how much you are spending on what. This can help you to easily track your cash flow and see areas where you might be spending too much.

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You Can Get Cash Back on Purchases

Shopping with a cash-back credit card means that you save on every purchase. The percentage of cash back you get will sometimes depend on the category of the purchase, such as groceries or specific retailer purchases. Other cash-back cards will give you a fixed amount back on all purchases, regardless of the category.

It Protects You From Dishonest Vendors

When possible, you should opt to pay for services like auto repairs and home improvement jobs with a credit card. This way if something goes wrong, you can easily dispute the charge and get your money back. If you pay with cash or check and your car stops working again or your contractor does a shoddy job installing new flooring, it’s more of a hassle to get your money back.

You Get Extra Time To Pay

Although it is never a good idea to charge expenses to your credit card that you won’t be able to pay back in full by the time your bill is due, it can be useful for making purchases when you’re in between paychecks and don’t have the money in your account to cover the purchase just yet. Paying with credit cards also allows your money to grow in interest-bearing accounts, such as a high-interest savings account or interest-earning checking account, in between payments.

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It Can Provide You With Rental Car Insurance

Many credit cards come with a number of consumer protections, one of which is rental car insurance. This means that if you pay for the rental car with your card, you’ll be reimbursed for the cost of theft or collision damage in the event of any incidents.

You Can Earn Frequent Flyer Miles Without Getting On a Plane

Most major airlines now have their own credit cards that enable you to earn miles with your purchases. Typically, $1 spent equals one mile, according to Investopedia.

It Can Protect Your Travel Plans

Your credit cards also might offer some form of travel insurance. Some cards will reimburse you for a trip that is canceled or cut short by sickness, severe weather or some other situations, even if your booking is nonrefundable. You might also be able to get reimbursed for accommodations and meals if your trip is delayed, or reimbursement if your baggage is delayed.

You Can Get Free Checked Bags

Some travel rewards cards allow you to get free checked bags on certain airlines when you book your travel with the card. This can be an extremely valuable perk for frequent flyers.

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You Can Earn Hotel Loyalty Points

Some credit cards allow you to transfer rewards points to a hotel loyalty program. That means you can swipe your way to room upgrades and even free stays.

Your Purchases Are Protected

Another perk that comes with some credit cards is protection for your purchases. This can include reimbursement for a purchase that is damaged or stolen and extended warranties on certain products.

You Can Save on Interest

When you move debt to a balance-transfer card with a 0% annual percentage yield, you can save big on interest payments. Just make sure to pay off any debt before the introductory period runs out and the interest rate rises.

It’s Less Likely You’ll Be Stuck Paying Fees

Debit cards charge overdraft fees and may also charge individual transaction fees. Although some credit cards have annual fees, if you use one without an annual fee and pay your bills on time and in full, you likely won’t have to pay any fees for using your card.

They Can Save You Money at Your Favorite Retailers

Retail credit cards can help you save when you shop at your favorite stores. Store credit cards might offer you discounts, cash back on purchases or rewards points that can be redeemed for future purchases. Store credit cards do often have high interest rates, however, so be sure to always pay these cards on time and in full.

You Can Save Money on Takeout

Some credit cards have partnered with food delivery services to get cardholders free delivery. If you order a lot of takeout, this can be a big money-saver.

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