Should You Pay for Everything with Your Credit Card?

For the last several years, consumers have been criticized for the excessive use of credit cards, which has led to record levels of consumer debt. Unquestionably, consumers should use the lessons of the past to prevent the kind of hardship that has led millions into bankruptcy. The biggest lesson is that it doesn’t pay to carry credit card debt. Most people get that, but they shouldn’t necessarily cast credit cards out of their wallets. We can name ten reasons to use your credit card that can actually improve your financial situation:

Better Cash Flow Management

If you are able to look at your credit card as if it were just a charge card, that is, a cash card that has to be paid in full each month, it can be a much more effective way to manage your cash flow. People who just carry cash can easily spend more than they intended, and because there is no record, other than receipts, of the spending, it’s difficult to track it. It is a great cash management tool as long as you use your credit card for budgeted expenditures.

Building your Credit Score

If you stop using your credit cards, your score will decline. The credit bureaus rely upon your credit activities and your history to score your credit. With no activities and with a diminishing history, there is nothing to score. The best way to build your score is to use your credit cards and pay them in full each month.

For Your Protection

Perhaps the best reason to use your credit card is to obtain the protections, such as fraud protection, identity theft, extended warranties, purchase protection, and return guarantees. You should never purchase expensive items such as TVs with cash. Too much can go wrong, and you won’t have any protections.

Travel Security

When traveling, you get extra protection such as travel insurance, lost/damaged luggage insurance, roadside assistance, and trip cancellation insurance (not all these benefits are available on all credit cards).

For Convenience

Let’s face it. Credit cards are faster, safer, and all-around more convenient than cash. These days, you can simply tap your card or mobile phone to a device on the register, and it will take care of the transaction.

For Emergencies

Life happens, and it often occurs at the least convenient or inopportune times. The credit card is your emergency fund when cash isn’t available.

Get Cash Back

Why not earn cash for spending your money. Credit card issuers are getting very competitive in offering cashback rewards that will pay you as much as 5% cash back on your purchases. It has been calculated that an average family of four spends $30,000 a year on typical, budgeted purchases, such as gas, groceries, utilities, entertainment, services, travel, gifts, etc. That can earn as much as $2,000 in cash back and other bonuses available in some programs.

You Can’t Replace Cash

We have all lost cash at one time or another – and for the unfortunate ones among us who lost a wallet with a bundle inside, the lesson is clear: Don’t carry cash. Credit cards can be replaced within a day, and your liability is limited to just $50 (many credit cards will reduce your liability to $0).

Automate Your Life

Sure, you can have certain services and merchants take automatic deductions from your checking account; however, that is fraught with danger (overdrafts, fraud, errors). With your credit card, you can set up automatic billing with many services and merchants and have the protections that go along with it. Plus, you will be earning rewards points or cash back with each debit of your credit card.

The Impulse Buy

OK, this may be one of the reasons why you shouldn’t carry a credit card. Impulse buys are at the root of most people’s credit problems. However, if you are in control and come across that item you’ve always wanted but couldn’t afford, you can put it on your credit card. The only caveat is that you will divert cash flow from other non-essential budget items to pay the balance quickly.