There are some consumers who always pay by credit card. They do it due to the myriad of perks that come with swiping at checkout. There are others who just like the convenience of not having to carry cash around with them.
Credit cards have long been a reliable method of paying for purchases. However, it is never been easier to use plastic. There is so much business being conducted online. Thus, using a credit card has become an integral part of daily life.
Yet, does that mean you should use your credit card for everything? For those who do not believe it is a good idea, they make some strong points. Large expenses are ideal for putting toward your balance. Conversely, it is the small purchases like a cup of coffee or a quick visit to the fast food drive-thru that can put your credit at risk.
The benefits of covering those minor costs with your card can make those rewards points or cash back percentages go up. However, you need to be careful. That is because the interest can also start to increase.
The trade-off may not be worth it. This is due to the fact that you could be taking on much more debt than you can manage. After all, it is all too easy for those small purchases to add up! You need to be on top of your finances in a responsible manner, and that’s hard to do when debt is piling up, even little by little.
You could soon find yourself paying a significant amount of interest on those small purchases. Suddenly, those purchases are not so small anymore.
That is one side of the argument. The other side typically espouses the benefits and advantages of credit card use for a variety of reasons. Many do it for the rewards they can earn. They also do it for the consumer protections.
People do it even for the fact that you can carry some form of debt without paying interest on it. However, that is only the case if you have the right card with a 0% APR. For the purposes of this article, we are going to explore all the reasons why using a credit card to pay for everything can be a good idea.
Credit cards are no longer viewed as a way for consumers to buy something they may not be able to afford with cash. They are now a vital financial instrument in today’s modern world. We always insist you use a credit card responsibly. There are so many advancements in the way we monitor our credit accounts. Thus, it is even easier to stay on top of your finances.
These are just some of the reasons that you should use your credit card for every purchase. However, let us take a closer look at all of the rationale that supports this theory.
Credit vs. Debit
Sometimes the difference between the two cards can get a little confusing. Put a credit card and a debit card side by side. You will find that they can look identical. Both may even have the MasterCard or Visa logo on them.
But the two types of cards operate very differently. Credit cards utilize credit that is placed on your balance. That debt can be carried over from one month to the next or it can be paid down in full. When you use one of these cards, you are also afforded many of the enticing perks that come with them.
Debit cards, on the other hand, are connected to your checking account. Therefore, the money you spend with that debit card is taken directly from the account in the same way as if you had written a personal check.
However, the money is withdrawn much quicker. Accordingly, merchants prefer a debit card over a check — because if your account has insufficient funds to cover an expense, the card gets declined instead of your check bouncing. Basically, a debit card is almost the same as using cash or a check (just faster than a check).
When comparing the two cards, many consumers prefer credit over debit because of all the benefits that come with using the former instead of the latter. It is important to keep in mind that you still need to remain accountable for your spending. Here we discuss all of the perks that you can enjoy with a credit card. Conversely, there are still some very specific credit card do’s and don’ts that come with those advantages.
It is all about being smart when you use your credit card. It is important not to take on more debt than you can handle. Maybe you can get the points or you want to push off paying for that item until next month. However, this just increases your debt.
This is not simply a way to tell you that it is okay to overspend. This is an overview of all the reasons why paying with a credit card can be a positive thing for your financial situation. It is for when you are able to afford the things you want to buy.
Now let us take a look at why you should pull out your credit card at the supermarket, or the gas station. That is in addition to a restaurant, a soda vending machine, or just about any place that accepts plastic.
There are credit cards of all kinds out there, and many different options available from hundreds of issuing banks and companies. They are all looking for ways to attract you as a customer.
Among the most popular of these are the many different rewards programs. These are offered to clients who have specific spending habits and strong credit histories. The way you can earn rewards is quite simple and straightforward in theory. Though, some programs make it a bit complicated. The premise of it dictates that you can earn points, miles, and cash back on the money you spend each month.
The more that you spend, the more you can earn. When you claim your rewards you can get cash returned to you via direct deposit into a checking account. Also, it can be applied toward your billing statement.
You can even use your rewards as a way to save money on travel or other future purchases. Some programs even offer merchandise. Those items can be purchased by using the points you have earned each month.
The idea of getting cash back on the things you buy most often is an enticing proposition. That is because you are saving money on those items by simply paying for them with your credit card. Most of the available programs will give you a minimum of 1% back on everything you buy.
Conversely, some of them work with categories in which you can earn around 2% to 6% on purchases made within each. These are typically centered on supermarkets, gas stations, restaurants, department stores, warehouse stores, and some online merchants.
You may happen to buy a lot of groceries or spend a majority of your monthly expenses at the pump. In these cases, you can benefit more readily with a card offering a higher cash back reward when making purchases at these venues.
Rewards programs can yield a substantial amount of money over the course of a year. Additionally, it may benefit you greatly to carry a credit card with a lucrative method of earning points or cash back.
Another exciting perk of credit card ownership comes in the form of a sign-up bonus. This is yet one more way that the card companies try to attract your business. They provide you with some kind of monetary incentive for signing up.
In just about every instance, you can receive a bonus of $100, $300 or even more. You get it when you spend a certain amount on the card in a specified period of time. Most cards usually give you about 90 days from the time you receive your card. Then, you can put that amount on your card in order to get the sign-up bonus.
However, you need to be careful. Just because you can earn all of these rewards does not mean you should spend beyond your means. Always be sure you will be able to pay your bill in full or at least in large part when your statement arrives. Otherwise, you could be asking for trouble where debt, late fees and penalties are concerned.
With that said, you may be financially comfortable enough to earn as many rewards as possible through your credit card use. In that case, there is only one way you will really be able to benefit from your card’s program. It is by using your card for every upcoming purchase, big or small. Thus, you can get the most out of your rewards program.
The Grace Period
When you make purchases with a credit card, you are essentially taking out a short-term loan. It is done with the understanding that you will buy an item now and pay for it later on. Whether that item is $1.00 or $1000 is really dependent upon your credit limit and your current balance.
Yet, any amount you put on the card is extended to you by the card issuer. It includes the expectation that it will be paid back when your statement arrives. Every card has something called an annual percentage rate (APR).
That rate determines how much you will pay in interest for receiving the “loan” from your credit card company. If you pay your bill in full at the time that it is due, you will pay little to no interest on that money. Let us say that you elect to carry a balance for an extended period of time. Thusly, you will begin to pay for that privilege through interest.
We discussed one of the reasons why some believe that putting small purchases on your credit card is a bad idea. That is because those purchases could end up costing you more over time.
This is both true and not necessarily accurate. That is because if you know exactly when the interest will get applied to your balance you can work to avoid it from happening. This is the case even if you do not pay the balance off when payment is due. That means you need to know when your grace period occurs.
The grace period can be useful. Plus, just about every card offers one to consumers. This is the period of time in which you are given extra time to make a payment before the interest hits your account.
In most cases, this extension can be anywhere from 14 to 25 days after the end of your billing cycle. However, you are only afforded this courtesy as long as you paid in full the previous month. Additionally, you must not have taken out any cash advances or transferred all or part of a balance from another account to your card.
None of this matters if you are currently enjoying a 0% APR on your card. That is because you are not being charged any interest anyway. Though, that will end at some point. When it does, you need to be aware of any interest charges that may be applied to your purchases.
Using a credit card responsibly is obviously going to help you build your credit rating. That means making purchases and paying down your balance each month. Be diligent about paying your bill on time. In doing so, the better your credit score will be.
What is a good credit score? Anything in the 680 to 850 range means that your credit is in great shape. Any number below that could prove more problematic when you apply for a loan or more credit.
That is why using your card for everything can keep your credit use active and robust. Therefore, if your credit is not so hot right now you; it can be rebuilt via positive behavior and practices.
Make sure to mind your credit utilization ratio. That is because it takes into consideration your credit limit and how much you’ve used. Most experts suggest that you keep it to 30%. This means that if your credit limit is $1000, you should not use more than $300 at any time. If you do, be sure to pay it down as quickly as possible.
Perhaps you are just starting to establish a credit history. There are a number of available cards on the market for consumers who are trying to build a credit rating. Maybe you have had some major problems that have lowered your score considerably. If so, you can find a range of credit cards for bad credit.
These are typically “secured” cards. With these cars, you make a security deposit before receiving your card. It is applied to your balance if you default on your payments. You can get that money returned to you if you close the account. You can also have your secured card converted to an unsecured version.
Nonetheless, without a credit card, the major credit reporting bureaus can’t develop an accurate score for your report. That is due to the fact that you have not demonstrated how responsible you are with credit.
Debit cards are not reported to the bureaus. That is because that money comes right out of your checking account. Only credit cards are reported. Only they can help you build good credit.
That is why using them to purchase just about anything you buy is a smart move. However, that is only the case as long as you keep your utilization in check. You also are required to pay your statement when it arrives or within the grace period.
When you pay for anything with a credit card, you are afforded a set of consumer protections. These can help combat fraud, loss or damage to the item you purchased. They even protect you in the event the price you paid for that item drops shortly after you made the purchase. If so, then you can get the difference reimbursed. Try doing that with cash. It is not going to happen.
Therefore, you may consider taking out your card to pay for something. It’s important to keep in mind all of the ways that your credit card issuer is protecting your transaction:
Almost every credit card has some safeguards in place to protect you in the event your card is stolen and fraudulent charges made. You will not be held responsible for those purchases. Additionally, the expenses charged are typically erased from your balance, pending a review or investigation of your claim.
This makes using the credit card a safe bet. It’s better than having cash stolen out of your wallet. Then, the thieves can go on a shopping spree with their ill-gotten fortune. The issuer will make sure your new card is sent out the next business day. Thus, you are not without a credit card for a long period of time.
Not every card offers this. Though, if yours does, then you are in great shape should something you buy drops in price over a period of 30 to 90 days. It depends on the card.
You’ll need to have proof of purchase and proof of the price drop. However, these should be sufficient to file a claim with your issuer. This may not be much of a big deal on a $20 item.
Conversely, let’s say you use the card to buy a 65″ big screen TV. It may become less expensive to the tune of a couple hundred bucks just a week or two after you buy it. Thus, you are going to want to that money back.
Let’s say you bought that 65″ TV, set it up, and have been enjoying it for a few months. Then, someone breaks into your home and steals it. You may not have an insurance policy that covers this loss.
However, if the credit card you used offers purchase protection, you could get the money to replace it from your credit card company. Purchase protection typically covers any item that is lost, stolen, or even damaged.
Perhaps you buy something but aren’t satisfied with your purchase. The store you bought it from may not have a very accommodating return policy. Paying for that item with a credit card may afford you the ability to return the item. In some cases, you can return it after the store’s initial return period has expired. Most retailers typically give you 30 days to return an item. Your credit card could extend that to as much as 90 days for a return.
You know the old saying. You are wasting your money purchasing the extended warranty. Part of the reason that is the case is because most of the major credit cards already have one that is applied to your purchases.
Your card could offer an extension on the manufacturer’s warranty. That potentially doubles the amount of time that is given on an item. Not every card has this protection, though. You may be unsure whether or not yours does. In that case, call the issuer or read the benefits guide that was given to you with your card.
Paying for everything with a credit card is easier than ever before. These days you don’t even need to have your physical credit card with you. Smartphones can take care of making payments.
This is done with apps that keep the card information on electronic file. Merely touching your cell phone to an automatic reader will execute the transaction. This is an additional component of security. It keeps your cards safe from unauthorized users. Additionally, paying for things are all that more convenient. That’s because most of us have our phones handy at all times.
Our Final Thoughts
Should you use your credit card for everything? There is a lot of evidence here that points to the answer being “yes”. This is due to the cash back offers, the consumer protections in place, and the ability to borrow money for a short period of time without getting charged interest. It is also because of the sheer convenience that comes with all of it at the checkout.
You may be hard-pressed to pay any other way now. But there is something that is even more important here. It’s the fact that paying with a credit card is designed to help you build credit.
This can be very useful if you apply for a loan or mortgage or even rent an apartment. Credit is a big part of American life. Therefore, making sure yours is healthy can open a lot of doors. Using a credit card to pay for everything can get you there. Just remember to try to pay your balance off frequently so that beneficial credit card debt doesn’t snowball out of control!