10 Times When It Would Benefit You To Pay With Your Credit Card:

Personal finance experts are known to spend a ton of energy trying to prevent us from using credit cards, and there’s a good reason for that. Many of us would use credit cards with no responsibility, ending up in a ton of debt.

Even so, contrary to popular belief, it would be much better if you’d pay with a credit card, rather than a debit card while keeping the same time cash transactions to a minimum. Let’s see why your trusty credit card comes out on top, and then we’ll discuss a couple of strategies you could try and when’s the best time to use a credit card.

One-time bonuses

Nothing compares to the initial bonus opportunity that comes with a new credit card. Many times, applicants that have good credit or even an excellent one might get approved for some credit cards that will offer bonuses as big as $150 or even more, in exchange for spending a certain amount of money (it can be anywhere from $500 to several thousands of dollars) in the first months you opened the account.

Other cards will entice applicants with bonus reward points or miles, that can be easily redeemed for travel, gift cards, or checks. However, on another note, a standard debit card that comes along with a bank checking account won’t offer any initial bonus or ongoing opportunity to earn rewards.

Cashback

The cash-back credit card was made famous in the United States by Discover, and the principle was very simple: you use the card and get 1% of your purchases rebated in the form of cashback. Nowadays, the concept has evolved and matured.

Some cards might offer 2%, 3%, or even as much as 6% on a range of specific purchases, even if these lucrative offers require quarterly or even annual spending caps. The best ones are those that will charge you minimal fees and interest, while also offering a higher rewards rate.

There are also some cards, such as the Fidelity Rewards card, that offer a high 2% rate of cashback reward on all of your spending, but you have to deposit your cash right into a Fidelity investment account.

Rewards points

Credit cards are “programmed” to allow cardholders to earn one or more points per dollar in spending. There are a lot of reward credit cards that provide bonus points for every specific category of spending, such as restaurants, groceries, or even gasoline.

When specific earning thresholds are hit, points can be used for travel, gift cards from retailers, and even restaurants. Your credit card rewards options are endless, which is amazing. You can get a co-branded card, that could have a partnership with a hotel chain, clothing retailer, or even a nonprofit organization, such as AARP.

This way, you’ll have the option of leveraging your everyday purchases, to earn valuable rewards.

Frequent-flyer miles

This perk is targeting all the rest. Back in the 80s, American Airlines started offering their consumers a new way to frequently earn flyer miles, even when they weren’t flying. It was all based on a specific partnership with the credit card giant, Citibank.

Nowadays, all domestic and international airlines have a minimum of one credit card offered, in a very similar partnership, by major credit card issuers. Cardholders usually earn miles at a rate of one mile per dollar, only in net purchases, and sometimes one mile per two dollars that are spent for lower-end cards with no annual fee.

Safety

By deciding to pay with a credit card, it will be much easier to avoid losses caused by fraud. When our debit card is used by a thief, the money is gone from your account right away. Legitimate expenses for which you have scheduled online payments or mailed checks might bounce, triggering insufficient funds fees and even affecting your credit.

It might not even be your fault, but these missed payments will lower your credit score. It can take a lot of time for fraudulent transactions to be reversed, and for the money to be restored to your account during the investigation.

Keeping vendors honest

Let’s say you want to hire a tile setter to arrange some flooring in your house. Workers usually spend the weekend cutting, measuring, grouting, and placing the tiles. Then, they charge you $4,000 for the trouble. Then, you draw upon your savings account and proceed on writing a check.

What do you do when you notice that the tiles start shifting, and the grout hasn’t set? Your flooring is now completely ruined, and you’re angry. You can easily take up the issue with a state licensing board, but the process will last forever.

That’s why you should pay for such a job with a credit card. This is probably the coolest thing about credit cards, they come with a mechanism that will bring you back the money!

Grace period

When you proceed on making a debit card purchase, your money will be gone right away. But when you pay with your credit card, your money remains in your checking account, until you pay the bill, and it can turn out to be helpful in a couple of ways.

First, the time value of money, even if it’s infinitesimal, will save you a lot of money. Delaying some future payments might make the purchase a bit cheaper than it would be in other situations. Secondly, when you keep on paying with a credit card, you’ll see that you don’t have to watch your bank account balance as closely.

Insurance

The majority of credit cards will instantly come with several consumer protection that people don’t even realize they have, like rental car insurance (even if secondary to your personal auto insurance), travel insurance, and product warranties that might exceed the manufacturer’s warranty.

Universal acceptance

Lots of purchases are a bit difficult to make with a debit card. When you want to rent a car or even stay in a hotel room, you will have an easier time if you have a credit card. Rental car companies and hotels would prefer for you to pay with a credit card because it makes it much easier to charge customers for any damage.

Plus, unless you have prepaid for your rental or hotel stay, the merchant won’t know what’s the final amount of your transaction. So it will require blocking out a certain amount of your available credit line, to protect themselves from other potential charges no one anticipated.

Building credit

If you don’t have any credit or you want to focus on improving your credit score, using a credit card with more responsibility might help you because credit card companies will send reports with your payment activity to credit bureaus.

Even so, debit card use doesn’t even appear anywhere on your credit report, so it might help you build or improve your credit. Even if you decide to deposit some funds to get a secured credit card, this will only help you build your credit history, and finally qualify for unsecured cards or even larger loans.

We’re curious to know what’s your take on using the credit card, rather than debit! So don’t be shy and tell us about your experience in the comment section below!

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