credit card benefits

Today, digital transactions and financial management have become integral aspects of our lives and credit cards have emerged as a universal financial tool. Credit cards represent a line of credit extended to cardholders like you by financial institutions, allowing you to make purchases on credit and repay the borrowed amount later.

These small, plastic cards have transformed the way you handle your finances. These cards offer credit card benefits beyond just being a means to purchase. These benefits have made them a lucrative option for making purchases and have even made them affordable. But despite these benefits, several people do not use these cards. Let’s discuss the top 11 reasons you should have a credit card. 

Top 11 Reasons Credit Cards Are Important

Credit cards have transformed the way we handle our money. These small plastic cards offer many advantages that extend far beyond mere convenience. Some of the top reasons why credit cards are important are:

  • Cash Back

Credit cards allow you to earn back a percentage of your spending in cash. This cashback feature functions as a discount on purchases, effectively reducing the overall cost. It’s akin to saving a little with every transaction, making your money work for you in unexpected ways. Cashback rewards can vary in terms of the percentage returned and the categories of spending that qualify for cashback.

  • Rewards Points

Each transaction you make with your credit card accumulates reward points. These points can be redeemed for various items, including gift cards, merchandise, or travel expenses. Accumulating reward points over time allows you to enjoy treats and experiences without straining your budget. Credit cards may offer rewards in various categories, such as dining, groceries, or travel, allowing you to choose a card that aligns with your spending habits.

  • Frequent-Flyer Miles

Travel enthusiasts can significantly benefit from credit cards that offer frequent-flyer miles. With these cards, every purchase you make translates into miles, which can be used to secure discounted or even free flights. This perk opens doors to potentially financially challenging travel opportunities, making your dream destinations more accessible. Some credit cards partner with specific airlines, while others offer more flexibility in redeeming miles for travel-related expenses.

  • Safety

Credit cards come equipped with strong security features. If your card is lost or used fraudulently, you are typically not held responsible for unauthorised charges. This security measure ensures your financial well-being and offers peace of mind in your daily transactions. Additionally, many credit card issuers now offer advanced security features such as EMV chips and two-factor authentication for online transactions.

  • Vendor Disputes

Credit card companies act as helpful middlemen when you are unhappy with a purchase. They talk to the seller for you, potentially getting your money back. This makes you more confident about your purchases and saves you from stressful arguments with sellers. So, they are crucial in ensuring your satisfaction and peace of mind while shopping.

  • Grace Period

The grace period of a credit card is the period during which you have to repay your balance without incurring interest charges. This window of opportunity, typically spanning a few weeks, offers flexibility in managing your payments, preventing unnecessary financial strain. The grace period usually applies if you have paid your previous month’s balance in full by the due date.

  • Insurance Coverage

Certain credit cards offer insurance coverage for various situations. This coverage may include rental car insurance, trip cancellation insurance, or extended warranties on purchased items. This added protection layer can safeguard your investments and provide financial security in unforeseen circumstances, such as a cancelled trip or a damaged rental car.

  • Universal Acceptance

Credit cards are universal and accepted widely at home and overseas. They offer convenience by eliminating the need for cash and enabling secure physical and online transactions. With credit cards, managing expenses becomes effortless, providing a simple and efficient way to handle your finances wherever you go.

  • Building Credit

Responsible credit card usage contributes positively to your credit history. Timely payments, low credit utilisation, and prudent financial management can enhance your credit score. A good credit history enables you to get good deals on loans for things like cars and houses. It can also make it easier to get better financial chances later on. But, if you pay your bills on time or owe less money on your credit cards, it can improve your credit score.

  • Interest-Free Cash Withdrawals

In emergencies, credit cards offer the option of withdrawing cash from ATMs. Some credit cards even provide this service without charging interest if the amount is repaid promptly. This financial safety net feature ensures you can access cash when needed. However, it’s essential to be cautious with cash advances, as they often come with fees and higher interest rates than regular purchases.

  • EMI Plans

Credit cards often allow you to convert large amounts into EMIs. This enables you to repay the cost of expensive items, making them more affordable. EMI plans to provide flexibility in budgeting and help you avoid the burden of paying for significant expenses simultaneously. It’s like having a built-in budgeting tool to control your finances effectively.

Conclusion

Credit cards offer numerous advantages when managed wisely. They simplify transactions, boost your creditworthiness, and provide a financial safety net during emergencies. You can secure a brighter financial future by understanding and utilising these credit card benefits. Make sure to review your credit card documents to maximise these perks.

FAQs

Q1. What are the 3 benefits of having a Credit Card?

Acquiring a credit card brings forth three primary benefits:

  • The ability to make purchases now and pay later.
  • The availability of various rewards.
  • The opportunity to build and enhance your credit history and score.

Q2. Are there any drawbacks of Credit Cards?

The drawbacks of credit cards are as follows:

  • Accumulating high-interest charges can result in debt if balances are not fully paid.
  • The temptation to overspend necessitates careful budgeting.
  • Credit cards often come with fees that can affect overall costs.

Therefore, it’s imperative to consistently pay your credit card bill on time and diligently review your statements. By comprehending these factors and taking preventive measures, you can reap the benefits of credit cards while mitigating potential drawbacks.

Q3. What role do Credit Cards play in establishing a credit history?

Credit cards play a vital role in the formation of credit history. When you use a credit card responsibly, make timely payments, and maintain low credit utilisation, they can create a favourable credit history.

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