Why I love credit cards

by Karl
Updated: July 16, 2018

Free money, rewards and purchase protection are some of the many reasons why I love credit cards

Credit cards are great! The negatives associated with credit cards are almost always more properly attributable to negligence on the part of the card holder. It’s essential to read the terms & conditions and use credit properly.

There are two critical requirements for you to be able to love credit cards as much as I do:

  1. Know what you are getting: Fees, benefits, restrictions.
  2. Have enough self-discipline to use credit sensibly.

Here are some notes about the many reasons why I believe credit cards are all about advantages and have almost no disadvantages:

Fraud protection

If someone tries to use your card/account fraudulently, you generally won’t be liable.

Credit card companies use very effective systems to detect fraud these days but it’s still worth remembering that your normal spending habits are used as a basis for detecting abnormal activity. For this reason, it’s always a good idea to notify your card issuer of any travel plans.

Track & analyze spending

Credit card statements are a great way of tracking spending especially if you reserve cards for specific uses such as business expenses.

Some card issuers provide breakdowns & analyses which can be useful.

Free money

With a credit card, when you make a purchase you obtain the goods immediately but you don’t have to pay the card until later. That’s an interest free loan.

Occasionally, I’ve been able to get a balance transfer as cash into my bank account for a fee (or no fee at all) that amounts to a lower interest rate than I can get by investing it. Note that this is not the same as a cash advance which is always expensive.

Rewards

Whenever I spend using my credit cards I get some kind of reward: Cashback, miles, points.

Some cards earn more rewards for certain types of spending than others and certain ways of redeeming rewards are more beneficial than others, e.g. $1 per point statement credit vs $2 per point on a gift card.

Purchase protection, free insurance

Credit cards provide various protections including free insurance with certain types of purchases such as travel and car rental and for when products you bought get lost or damaged.

International

Foreign currency cash can represent a major inconvenience, but all the major credit cards work internationally. Just be sure to use cards that have good exchange rates and no fees.

Save money

Credit cards allow you to develop your credit history and a high score saves money on things like insurance and interest rates.

Debt management

Credit cards usually have a relatively low minimum payment which gives you much more flexibility than a loan.

Sure, interest on a credit card balance derived from purchases is high but not if you balance transfer it out.

Pros & cons

It is easy to spend money you don’t have using a credit card. Personally, I consider this to be as much a pro as a con.

One disadvantage, of course, is that credit card payments are not accepted everywhere and small/new vendors may not be set up to process them.

Related disadvantages are when the particular card you want to use isn’t accepted, when a vendor charges fees to customers using credit cards or when a vendor refuses to accept card payments for small amounts.

More info

“Things Every Credit Card User Needs to Know About Fraud” at nerdwallet.com.

“Purchase protection benefits: What they are, how to use them” at creditcards.com.

“Where and How Widely are Visa, Mastercard, Discover and American Express Credit Cards Accepted?” at valuepenguin.com.

“Why I Love Credit Cards & You Should Too” at personalfinanceinsider.com.

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