5 reasons you need a credit card

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You may have grown up being told that credit cards are “for emergencies only.” While a credit card is useful when you need to make a large purchase and don’t have the cash on hand, the benefits of owning a card extend far beyond buying now and paying later.

Read more: The Fastest Ways to Pay Off Your Credit Card Debt
To learn: The best purchases you should always do with a credit card

Credit cards aren’t for everyone, especially those who struggle to spend within their means and pay their bills on time. But if you’re responsible enough with your money, avoiding credit cards could actually cost you money in the long run. Here are five reasons why you should have one.

Build credit

One of the main reasons for owning a credit card is that it makes it easy for you to build up good credit over time. “Whether you are just graduating from college or trying to give your family the best life, you are likely going to run into situations where having good credit scores can make or break securing things like mortgages, contracts. rentals, auto loans and more, ”says Nathan Grant, a senior credit industry analyst for Credit card insider. In other words, good credit is important even if you aren’t interested in borrowing money just yet. And if you are, having good credit can also save you money by securing lower interest rates.

See: Why it’s always better to use your credit card over your debit card

“Using a credit card responsibly over time is one of the most direct ways to build a good credit history,” Grant said. Fortunately, there are many credit card options available for those who already have little or no credit. “

Better security

Even if you have money in your bank account to make a purchase now, using a credit card may be the safest option from a security standpoint.

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For example, Grant said that if your credit card information is stolen and a fraudulent debit appears, you can contact your issuer and get a new card issued to immediately resume normal credit card use. The Fair Credit Billing Act also imposes a liability cap of $ 50 for such charges if they are promptly reported, “But most credit card issuers won’t hold you responsible for anything at all,” Grant said.

However, if you pay with a debit card and your information is compromised, any fraudulent charges will be deducted from your checking account, which could affect other important financial responsibilities, Grant added. In addition, it may take longer to settle with your bank or financial institution.

Reimbursement on expenses

Nowadays, most credit cards offer some type of reward on spending, whether that’s a certain percentage of cash back or miles that you can apply for future trips. “It’s even true for those who don’t have annual fees,” said Phil Dengler, co-owner of The Vacationer.

Read more: This simple trick will improve your credit score and avoid late payments
Discover: What is a good credit score?

For example, let’s say you have a credit card that offers 2% cash back on groceries and gasoline, and 1% on everything else. If you spend $ 500 a month on the grocery store and gas station, and $ 1,500 on the rest of your bills, that’s $ 25 back in your pocket.

As long as you strive to pay off your balance each month to avoid interest charges, using a rewards credit card is an easy way to earn extra cash for the purchases you were going to make anyway. way.

Purchase protection

Another practical benefit that some credit cards offer is purchase protection. This means that if you make a purchase with the Card and that item is stolen or damaged (or in some cases lost), you may be able to have it replaced or repaired for free.

Discover: 10 credit score myths you need to stop believing

Dengler noted that the level of protection varies by card, but some offer reimbursement up to $ 50,000 per year – “something you won’t get by paying with cash or debit card,” he said. he noted.

Rental car insurance

If you are traveling, it can be helpful to have a credit card that offers rental car coverage. Car rental companies usually charge quite a bit for insurance, but many credit cards offer free primary or secondary insurance. With primary insurance, you can file a claim without having to go through your auto insurance company at all. However, most cards offer secondary insurance, which means you need to file a claim with your insurance company first, and then your credit card policy will cover the remaining charges.

Options: 10 credit cards to consider for travel rewards
See: What happens when you are denied a credit card and what to do next

“This coverage can save you hundreds if not thousands of dollars if your rental car is stolen or damaged,” Dengler said. And by the way, you often need a credit card to rent a car in the first place.

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Last updated: October 8, 2021

About the Author

Casey Bond is a seasoned editor and writer who has been covering personal finance for over a decade. Currently, she is a reporter for HuffPost covering Money, Home, and Life. Previously, she held editorial management positions at Student Loan Hero and GOBankingRates. Casey’s work has also appeared on Yahoo !, Business Insider, MSN, The Motley Fool, US News & World Report, Forbes, TheStreet and more.

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