Using a credit card for most of your purchases can provide significant benefits and make your financial life easier. From earning lucrative rewards to building credit history and enjoying complimentary protections, the advantages of paying with plastic are numerous. In this article, we’ll explore five compelling reasons why you should consider using a credit card for almost every purchase.
Key Takeaways
- Credit cards offer valuable rewards programs that can earn you cash back, points, or miles on your spending.
- Responsible credit card usage helps build your credit score, which can lead to better loan terms and approval rates.
- Many credit cards provide complimentary insurance coverage for travel, purchases, and more.
- Credit card statements categorize your spending, making it easier to budget and track expenses.
- Credit cards are generally more secure than cash or debit cards, offering zero fraud liability protections.
5 Reasons to Buy Almost Everything With a Credit Card
While using a credit card irresponsibly can lead to debt, there are several benefits to using credit cards for most purchases when managed wisely. Here are five reasons why:
Earn Lucrative Rewards on Spending
One of the most compelling reasons to use a credit card for your purchases is the ability to earn rewards. Many credit cards offer cash back or points/miles on every dollar you spend, essentially paying you to use their card.
Cash back credit cards typically earn between 1.5% and 6% back on purchases, depending on the card and spending category. For example, the Citi Double Cash card earns an impressive 2% cash back on all purchases (1% when you buy, 1% when you pay your bill).
If you spend $2,000 per month on this card, you’d earn $480 in cash-back rewards annually, just for using your credit card instead of cash or debit. That’s like getting a 2% discount on all your purchases!
Travel rewards credit cards allow you to earn flexible points or airline miles that can be redeemed for free flights, hotel stays, and more. The value of these rewards can often exceed 1 cent per point when redeemed strategically.
Many rewards cards also offer bonus categories that earn elevated rewards on common spending like groceries, gas, dining, and travel. By using a combination of cash back and travel rewards cards strategically, you can maximize your earnings on every purchase.
Just be cautious of overspending solely to earn rewards, as that can quickly negate the value of the rewards earned. Always pay your statement balance in full each month to avoid interest charges that can diminish your rewards earnings.
Get Complimentary Insurance Coverage
In addition to rewards, many premium credit cards provide valuable insurance coverage and protections just for using the card to make eligible purchases. These complimentary benefits can save you hundreds or even thousands of dollars compared to purchasing separate insurance policies.
On the travel front, cards like the Chase Sapphire Reserve and Platinum Card from American Express offer:
- Trip Cancellation/Interruption Insurance: Get reimbursed if you have to cancel or cut your trip short due to covered situations.
- Baggage Delay/Loss Protection: If your bags are delayed or lost by the airline, you can receive compensation.
- Auto Rental Collision Damage Waiver: Decline the rental company’s expensive collision coverage, as you’re covered by the credit card.
- Emergency Evacuation Coverage: Get emergency medical transportation covered if needed while traveling.
For new purchases, many credit cards extend the manufacturer’s warranty or provide protection against theft or damage:
- Extended Warranty Protection: The manufacturer’s warranty can be doubled, up to an additional year in most cases.
- Purchase Protection: If an eligible new purchase is stolen or damaged, you can receive reimbursement.
- Cellphone Protection: Pay your monthly cellphone bill with the card, and your phone may be covered against theft or damage.
By using a credit card that provides these coverages, you can enjoy valuable insurance benefits without paying costly premiums.
Easily Build Credit History
Having a good credit score is essential for qualifying for loans, mortgages, rental properties, and sometimes even jobs. One of the easiest ways to build your credit history and improve your score over time is through responsible credit card usage.
Payment history (making on-time payments) and credit utilization (keeping balances low relative to your limits) are the two biggest factors impacting your credit scores. By using a credit card for everyday purchases that you’d make anyway, then paying the statement balance in full each month, you can build an excellent payment history while keeping your reported balances very low.
There are credit card options available for all credit levels:
- No Credit History: Student cards or secured cards (requiring a refundable deposit) can help establish your credit from scratch.
- Fair/Average Credit: Cards marketed towards those with “fair” or “average” credit can allow you to continue building credit.
- Good Credit: As your score improves into the “good” range, you’ll have access to more premium rewards cards.
Becoming an authorized user on someone else’s well-aged credit card is another way to kickstart your own credit file and credit score. Just be sure the primary account holder has responsible credit habits.
Over time, as your credit score rises through responsible credit card usage, you’ll gain access to better interest rates on loans, higher credit limits, and improved approval odds for rentals, mortgages, and more.
Streamline Budgeting and Track Spending
In addition to building credit history, using credit cards can also simplify budgeting and expense tracking compared to using cash or debit cards. This benefit comes from credit card issuers automatically categorizing your purchases and providing detailed transaction histories and spending reports.
For example, when you log into your credit card account online, you’ll see all purchases categorized by merchant category like:
- Grocery Stores
- Restaurants
- Gas Stations
- Travel
- Entertainment
- And more
Many issuers also provide spending analysis reports that show your total expenditures in each category for the month, year, or custom date range. This makes it very easy to see where you’re allocating your money and identify areas to cut back.
If you use a budgeting app like You Need A Budget (YNAB) or Mint, you can automatically import all of your credit card and bank transactions. The app will then prompt you to categorize each purchase, giving you a comprehensive view of your spending against your budget categories.
Trying to track cash spending is notoriously difficult, as you’d have to manually log every transaction. And with a debit card, unless you meticulously record the merchant for every purchase, you lose that categorization. Using credit cards streamlines expense tracking for easier budgeting.
Enhanced Security and Worldwide Acceptance
Finally, credit cards offer superior security protections and are accepted nearly everywhere compared to carrying cash or using a debit card.
If your credit card is lost or stolen, you have zero liability for any fraudulent charges made on the account, as long as you report it promptly. Your money is never actually at risk.
With a debit card, fraudulent charges pull funds directly from your checking account. While you should get that money reimbursed eventually, it can cause temporary cash flow issues if the stolen amount overdraws your account. You may incur insufficient funds fees or have payments bounce in the interim until it’s resolved.
Cash is perhaps the biggest risk, as any stolen money is gone for good with no way to recover it. Only carry small amounts of cash when absolutely needed.
From a merchant acceptance standpoint, credit cards are taken virtually everywhere – from big box stores to tiny mom-and-pop shops, restaurants, hotels, airlines, and more. Some merchants may even offer discounts or bonuses for using a credit card versus other payment methods.
Trying to make purchases with cash, checks, or a debit card may not be possible in many establishments, especially when traveling internationally where merchants heavily favor credit cards.
When Cash or Debit May Be Preferable
While credit cards offer many advantages, there are some scenarios where using cash or a debit card may be a better choice:
- Credit Card Surcharges: Some merchants pass on the credit card processing fees by adding a surcharge (often 3-4%) for paying with a credit card. Unless your rewards rate exceeds this surcharge, paying another way may be better.
- Small Merchants: For small businesses like lemonade stands or farmers market stalls, they may appreciate you paying cash to avoid processing fees that cut into their margins.
- Overspending Temptation: If you struggle with overspending when using a credit card, sticking to cash or debit can provide guardrails against going overboard.
Even in these situations, the convenience of credit cards often outweighs the drawbacks for most consumers. Just be mindful of any surcharges and support small businesses when possible.
Conclusion
Using a credit card responsibly for most of your purchases, you open yourself up to a world of valuable benefits. From earning hundreds in cash back or travel rewards annually, to enjoying complimentary insurance protections, building credit history, streamlining budgeting, and enhanced security – the advantages of using credit cards are numerous.
Just remember to pay your statement balance in full each month to avoid interest charges that can diminish those hard-earned rewards. As long
