Credit cards offer numerous benefits that make them a must-have financial tool in modern life. They offer users a convenient way to manage finance, while also providing store and purchase discounts, reward points, travel miles, and protection against fraud and theft. However, understanding the benefits of credit cards and how to use them properly is important to avoid falling into debt and causing financial problems.
This comprehensive guide will provide a detailed explanation of the benefits of credit cards, how to choose the ideal card that suits your needs, and how to use your credit card responsibly.
Benefits of credit cards
Easy access to finance
One of the most significant credit card benefits is the convenience they offer in accessing cash when you need it. Unlike traditional loans that require you to apply for and receive approval before accessing funds, with a credit card, you can access cash or make purchases as long as you have enough balance in your card.
Rewards/ discount points
Many credit card companies offer customers reward points and discounts to encourage spending. Credit card rewards vary depending on the company and the type of credit card you have. Some credit cards offer rewards points for purchases, bonus points when signing up, and cash-back bonuses for certain categories of expenditure. With many reward systems, you can accumulate points over time and redeem them for discounts on purchases, travel, or other in-store discounts.
In the US, popular rewards offered by credit card companies are cash-back rewards, travel rewards, and air miles rewards programs. Travel rewards points offer cardholders an opportunity to accumulate points when booking flights, hotels, and rental cars. Points can be redeemed for travel in the future. Cash-back rewards are granted for every purchase made using the credit card, and the percentage of cash-back offered depends on the card issuer. Some credit card companies offer cash-back rewards as a first-time user incentive. Air miles rewards allow the cardholder to accumulate points that can be redeemed to purchase plane tickets or upgrades.
Convenient payment method
Credit cards provide easy payment methods for goods and services; they are used to make online purchases, pay bills, and purchase physical goods. Credit card also provide a convenient payment method for in-store purchases, as one only needs to swipe the card on a card reader to complete a transaction.
Credit cards offer financial protection as they allow customer’s protection from fraudulent acts. In the US, the Fair Credit Billing Act, Section 75 Credit Cards Act, and the Electronic Funds Transfer Act are valuable Federal Acts that protect credit cardholders in cases of card fraud, unauthorized purchases, and billing errors.
Improves credit score
Credit cards also improve credit ratings. When a cardholder uses their credit card responsibly and makes payments on time, it helps to improve their credit score. A great credit score helps with other financial needs such as applying for a mortgage, loan, or any other form of high-value credit. Its also essential for future planning, as a good credit score does not only offer better interest rates and more extensive credit options but also makes it easier to pass background checks when applying for jobs or rental homes.
How to get a credit card
Once you’ve understood the credit card benefits and have concluded that it is useful for you, the next thing you may want to know is how to get one.
The first thing to consider is to choose a credit card that best suits your needs. You need to determine your credit card priorities – the card type that best aligns with your financial needs. You may want a card for its rewards points or travel rewards, lower APR, or just a regular credit card with your current bank. And to find the perfect credit card, its wise to shop around for the best deal.
After choosing a card, you need to gather the necessary information required for the application process. Necessary documents such as a valid form of identification, proof of employment, and proof of income may be needed, so ensure that you have all the required documents before applying. Credit card applications are usually filled online or via mail. The application process is usually quick and straightforward, and the response time comes almost immediately.
It is worth mentioning that if you have a poor credit rating, the chances of getting a credit card are slim, and the interest rates charged for obtaining one may be higher.
How to use credit cards responsibly
Credit cards can be used responsibly by following simple rules:
1. Don’t carry balances over. Avoid letting your balance accrue each month as this will attract an added cost by interest fees, meaning that you’ll end up paying more than the balance amount you owe in the end.
2. Proper allocation of funds. Before making any purchases, make a budget and ensure that you have enough money to cover the costs. Avoid using a credit card recklessly to buy items you cannot afford.
3. Pay bills on time. Credit card payments must be paid promptly to avoid late fees and damaging credit scores.
4. Take advantage of rewards and discounts. Rewards and discounts offered by credit companies should be used to save costs and not as an excuse to spend more.
5. Regular monitoring of credit reports. Credit reports must be monitored frequently to avoid identity theft and unauthorized purchases.
Credit cards can be fantastic assets to your finances if used properly, responsible usage can lead to an excellent credit rating and better credit options. By following the simple rules listed above, credit cards can be used safely, and they can offer users financial benefits and protection against fraud and theft.
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