In my experience, credit card companies are also very flexible when it comes to waiving late fees, annual fees, lowering your annual percentage rate (APR), lower charges for balance transfers, and extending grace periods when needed. There is a lot of competition for credit card customers, so credit card companies are willing to negotiate when you need them to. Some of the credit card advantages include:
1. Earning Rewards.
Credit cards offer you discounts at certain stores, travel deals, cash back, and rewards. The points or rewards programs can be used to buy gift cards, gifts, trips, or free hotels. I have a card I use for different items. I use one card for buying groceries that offers 5% back, one for
purchasing gasoline that offers 4% back, one for travel purchases that offer 10% back, one that gives me 3% back on purchases made at Costco, and another for general purchases that give 2% back on everything. I was awarded over $10,000 in free hotel credit with my Orbitz Rewards Visa over four years. I was able to stay for free everywhere I went just for using my credit card to make the purchases I was already making.
2. Theft Protection
If your credit card or credit card number is stolen online, it’s generally easy to get the money back once you report it to the credit card company. Most credit cards offer a zero liability coverage policy for theft protection. Credit cards also have controls in place to prevent fraud. If they see unusual purchases, they can block your account, send you emails, text messages, or make phone calls to help stop the theft from occurring. You can also monitor your online account for purchases you did not make. I've had my credit numbers stolen online several
times and my banks always found out before I did. The bank’s fraud protection unit handled everything and I wasn’t responsible for any of the charges. The fraud protection offered by credit cards is one advantage over a debit card. When I lost my ATM card and my bank account was cleaned out, it took longer for the bank to investigate and recover my money. Also, my autopayments started bouncing because my account was frozen resulting in late payments, and inability to make payments from my account.
3. Travel Benefits
Using credit cards while traveling can save you money over using the local currency. Credit card companies give you the best exchange rates available for purchase, and as long as you have a credit card that does not charge the 3% conversion fee, the exchange rate you get on your card is always better than the banks. You also won't have to pay conversion fees or commissions charged by currency change houses for converting your money to the local currency.
Hotels and car rental companies often charge a deposit for using their services. Most will accept a credit card number in place of leaving a sum of cash which allows you to hold onto the money in case you need to spend it. You are therefore increasing your cash on hand. Another benefit is free accident insurance, trip interruption and cancellation protection, and rental car insurance when you travel. I rented a car in South Africa which sustained over four thousand dollars in damages. My Visa credit card insurance covered the damages, and I paid a few hundred for a deductible.
3. Building Credit.
Using credit cards to build your credit history is the easiest and most effective way to do so since credit card companies report to the credit agencies every month. By using your credit cards to build up your credit score, you can make it easier for yourself to buy houses, cars, or take out loans. Use your credit cards regularly, pay them off monthly, and on time to help increase your credit score with the credit agencies. Doing so will make it much easier to borrow money at a reasonable interest rate when you need it. On the other hand, if you don't manage your credit cards properly or make late payments, then you will be denied for all of the previously mentioned loans and you’ll be paying much higher interest rates. I have multiple credit cards, and I try to spend about twenty dollars each month on each card and pay it off in full at the end of the month. This allows me to keep asking for credit line increases which can be used when needed on business deals.
4. Paying for Emergencies or Unplanned Expenses.
If something comes up unexpectedly anywhere in the world, a credit card can almost always get you out of any jam whether you're helping yourself or someone else. They are a great resource to have at your disposal if you're traveling and you don't have any local currency or can't convert the currency you do have. I've also had situations where I’ve had to help a family member or friend who was traveling abroad. Credit cards have a reach to just about anywhere on the planet as merchants will take payments online or over the phone. The credit card is also very convenient as it can cover unplanned expenses without having to search for a checkbook, run to a bank for cash, or have to pull out money from an ATM if you're in an unsafe situation.
5. Low-Cost Short Term Loans.
Credit cards allow you to increase your purchasing power by making money available to you before you have it. Let’s say you're on a two-week vacation and you have $1,000 to spend on your trip. When you check into your hotel they require a deposit of $100. When you rent
your car they want a $200 deposit. Because you had to pay $300 deposit for the car and hotel, you'll only have seven hundred dollars left to spend on your trip. If you had a credit card, the hotel and the rental car company would accept the credit card credit line as a deposit, which would leave you with all of your $1000 to spend if you needed it on your trip. If you decide you want to extend your trip for another week, but your paycheck isn't going to be available for another week. You can use your credit card to cover all of your additional expenses and you'll have at least another thirty days of an interest-free loan on your card. Credit cards increase your purchasing power by allowing you to spend money before you have earned it.
6. Accounting.
Credit cards subdivide your yearly expenses into spending categories by providing monthly and annual summaries — an excellent resource to help you analyze your spending for budgeting or when it is tax time. Many of the credit card websites even allow you to import the spending data into your tax or accounting software. I've had situations where I was robbed or had court cases where I needed to show receipts for items that were stolen or damaged. The problem was that I had bought the items years ago and I didn't have the receipts, or they were faded, and I could no longer use them. I was able to go online and go back several years onto my credit card statements and find the purchases on my accounts. The IRS and the courts will accept these statements as receipts for items.
7. Consumer Protection.
Credit card companies have sway in the marketplace because of their size, so when you get into problems with a purchase, they can help you get out of it. Credit cards will help you get your money back for defective products if you buy something and the price drops in ninety days they will refund the difference, dispute charges, and extended product warranties. I bought a bed in the reduced section at Ikea that was nonrefundable because of the markdown. I asked the sales agent if I could open the box to inspect it and he said no because the item was brand new and it was on clearance simply because it was a discontinued model. I thought I was getting a brand new bed that was marked down. When I got home and opened the brand original box to assemble the bed, I found that the bed had been used and the parts in the box where broken. I returned the box to IKEA, and they said they could not do anything for me, and I was out of luck. I spoke to the manager and received a similar answer. So I called my credit card on the spot, and they told me over the phone to leave the bed there with the manager whose name they asked for and walk away. I did, and I was credited for the full purchase price and Ikea never even disputed it. Whenever you're misled or purchased something faulty, the credit cards can help you in disputes.
If you're not disciplined, the convenience of credit cards can also be a disadvantage. It's effortless to overspend and get stuck trying to get out from under the high-interest rates that credit cards charge. So keep in mind that a credit card can be your friend if appropriately used if not they can be your worst enemy, and the damage to your credit can have lifelong consequences.
These were my top 7 credit card advantages. For more credit card information, check out my latest Amazon book.