Having a credit card isn’t just convenient – it can come with a wide range of other benefits for the savvy consumer who picks a suitable credit card and uses it responsibly.
Below, you will find a few examples of how having and using a credit card in a smart way can help us in our everyday life.
Tip! We recommend you also read our article about common credit card pitfalls and this article with general information about credit cards – Knowledge is power.
Building credit history
You can use a credit card to build credit history without actually having to go deep into debt. A lot of people erroneously believe that you must carry a balance from month to month on your card to build credit history. In reality, using a credit card and paying the credit card bill in full each month is a great way of building credit history. You can get a credit card with no annual fee and where no interest is charged as long as the bill is paid in full each month. (Avoid cash withdrawals. There are usually special rules for them, and they can be costly.)
Examples of situations where having an established history of responsible handling of credit can help you:
- You want to rent a car
- You want to rent an apartment
- You want to get a good phone plan
- You want to get a highly beneficial credit card
- You are negotiating for a home mortgage loan
- You are applying for a job that involves handling money or other valuables
Some credit cards have great cash-back offers. Take a look at your spending habits and pick a credit card with a cash back that will actually make a difference in your budget. If you buy a lot of gas each month, pick a credit card with a great cash back for gas purchases, and so on.
A credit card can be used as an emergency line of credit. Many people prefer to keep their actual emergency savings in a (preferably high-interest) savings account, and use their credit card when they find themselves in an emergency. Once the most immediate needs have been tended to, they can use money from the savings account to pay the credit card bill.
Safer than cash
It is usually easier to get your money back from the credit card issuer if your credit card is stolen or defrauded, than to get compensation from the insurance company if physical cash is stolen. It is also easier for both the card issuer and the police to track how a credit card has been used, as opposed to trying to figure out what happened to that $100 bill that someone stole out of your pocket.
There are credit cards that come with complimentary insurance, such as travel insurance or car rental insurance. Some will automatically insure you against fraud, theft and damaged goods when you purchases things online using the card.
Hotels & Car Rentals
Many hotels will ask for a credit card upon check in. Some will not even accept guests without a credit card, while others will require a cash deposit from those who can not or will not have their credit card on file with the hotel. Even if you dislike this practice, there might be situations where you are in a pinch and really don’t want to spend the night outdoors.
There are also quite a few car rental agencies that will only rent to people who are willing to leave their credit card details on file. Even if you don’t normally rent cars, it can be nice to know that you can rent a car in an emergency, and without having to run around trying to find an agency that accepts renters without a credit card.