Not everyone loves credit cards — plenty of people really, really hate them, in fact. But credit cards can also be a great tool to have tucked away in your wallet. Credit cards serve a valuable purpose for many consumers and, when used responsibly, can do a whole lot more — earning you some money, giving you financial freedom and helping you in an emergency.
Why do we love these little pieces of plastic so much? Let us count the ways.
1. You Can Make Money
Before I get into how awesome rewards credit cards are, a disclaimer: Rewards credit cards generally carry high interest rates, which outweigh any reward you may earn by making purchases that you don’t pay off in full, so it’s not a good idea to carry a balance on these cards. You can dig yourself deep into credit card debt that way, which is not worth whatever you’re earning.
When used responsibly, you can save a ton of money with rewards cards. Whether it’s cash back, hotel rewards, airline miles or exclusive cardholder benefits, you can maximize your money just by using a certain credit card for your everyday purchases. Here’s an expert guide to finding a great rewards credit card.
2. No Overdraft Fees
Unlike with a debit card, you can actually spend more money than you have — that’s not something you should do, but in the event of an emergency like a car accident or travel hiccup, you can spend more money than you have in your bank account without the worry that you’ll incur a fee for doing so.
However, you can get charged an over-the-limit fee if you exceed your credit limit, even if it’s because of interest charges, but you have to opt in to over-the-limit fees. You should always try to keep your credit card balances as low as possible relative to your credit limit, because a high debt-to-limit ratio on your credit card can negatively impact your credit score. To see how your credit utilization affects your credit score, you can take a look at two of your credit scores for free every 30 days on Credit.com.
3. Extra Protection
If your wallet is stolen with a bunch of cash, you probably won’t get it back. If your wallet is stolen and the thief uses your credit card, you’re not liable for more than $50 of the unauthorized charges — most issuers won’t hold you liable for anything if you report it immediately, but legally you can be responsible for $50. Even debit cards aren’t that safe. First of all, if someone uses your debit card, they’re depleting your bank account, not just running up a balance on your card. Second of all, debit cards have different consumer protections, so depending on how quickly you report the fraud, you could be held liable for more than $50, even all, of unauthorized transactions.
4. Help You Build Credit
Using cash does not help you build credit. Using a debit card doesn’t, either. A credit card does. Keep your balances low and pay your bill on time, and you’re doing one of the easiest things you can do to establish a good credit history.
5. Online Shopping Is Easier
If you don’t have a form of electronic payment — debit card, credit card, gift card, PayPal, etc. — you can’t shop online. The benefit of a credit card is that if your credit card number gets stolen because of an online transaction or insecure Internet connection, you have those good fraud protections to put you at ease. Still, you want to stop credit card fraud as soon as you notice it, so you should check your account activity on a daily basis.
6. Help in a Emergency
Say your pet swallows something, your car breaks down or you need to replace your cellphone ASAP — if you don’t have the money in your bank account, how will you pay for it? Ideally, you have an emergency fund to cover unexpected expenses, but if not, a credit card can come in handy. Don’t let that balance hang out too long — you can end up paying a lot of money in interest the longer you wait to pay off that debt. You can use use this credit card payoff calculator to figure out how long it will take you to pay off your credit card debt.
7. There’s a Credit Card for Everyone
It doesn’t matter where your credit stands, you can get a credit card. You definitely have more options with better credit, but if you need to rehabilitate your credit standing or get started, a credit card may be the best way for you to do that. For example, you could get a secured credit card, which requires a deposit and sometimes an annual fee, but if your goal is to improve your credit score, you can probably do it that way.
Before you apply for a credit card, make sure you have a good idea of where your credit stands, and only apply for credit cards with requirements you meet — and you’re thus more likely to be approved for. Take the time to read through the terms and conditions of the product, because you should only apply for credit when you need it, and you want to make sure you’re getting the card best suited for your needs.
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This article originally appeared on Credit.com.
This article by Christine DiGangi was distributed by the Personal Finance Syndication Network.