Credit card benefits can outweigh the drawbacks, helping you financially

The Hidden Benefits of Credit Cards

Credit cards are often vilified and sometimes even feared, but when used responsibly, they can actually be very beneficial to your finances. Many savvy personal finance bloggers are well aware of the positive side of credit card use. For folks who are in debt, however, these pieces of plastic might seem like the enemy. The truth is that when used correctly, credit cards can have a positive impact on your finances.

Still not sure that credit cards can actually help improve your financial situation?  Let’s explore some of the hidden benefits of credit cards:

Building Credit

If you need to build credit from scratch, getting your first credit card is the way to go. You can quickly and easily establish credit by using the card to make small purchases, then paying it off in full every month. Keep that first account open, because it helps to age your credit report, which will boost your score over time.

Tracking Your Spending

One of the first steps to creating a budget and getting your finances in order is to track your spending. This isn’t exactly easy or convenient to do when paying with cash- you have to hold on to receipts, or be very good about jotting things down! When you pay with a credit card, you can see where your money goes without having to hunt down receipts or rack your brain.

trackingspending

Earning Cash Back Bonuses

Some cards offer cash back bonuses that can really add up over time. We currently have a Discover card that gives 5% back on qualifying purchases. For a few months, the bonus was offered every time the card was used at gas stations. So we put all of our gas purchases on there in July, August, and September, and just cashed out over $20. Not bad!

Related:

How to Meet Credit Card Spending Requirements

Racking Up Reward Points

This year saw my first foray into earning credit card rewards. I got the Barclay’s World Arrival MasterCard, and so far, we have over $600 in rewards just waiting for us to spend! Ideal for us, since we love to travel.

One caveat: you do need to have a good, sometimes great, credit score to qualify for many rewards cards. If you do, don’t underestimate the benefits of credit cards! They can really work to your advantage, and help you build better credit along the way.

Taking Advantage of Special Offers

I always said that I wouldn’t sign up for a store credit card until I did. There was one big reason why I got a Kohl’s charge, and it wasn’t because I wanted to spend money that we don’t have. It was because I wanted to take advantage of the offers that come along with being a cardholder.

The Kohl’s card brings me as much as 30% off, on top of any sales going on in the store. That means we can save as much as 80- 90% when we shop there! Since Kohl’s has good sales on clothing, toys, and housewares, we’d have to be crazy not to take advantage of the benefits of having a store charge card. In fact, we do most of our holiday shopping there, and we save a ton!

Read the fine print

With any card that you apply for, you always want to read the fine print. Check the APR and any annual fees. I personally prefer to avoid annual fees unless the rewards are really worthwhile. If you can use credit cards responsibly, you can take advantage of some sweet benefits!

Do you like to use credit cards for the benefits, or do you avoid them?

27 comments on “The Hidden Benefits of Credit Cards

  • Brandy @ Busted Budget , Direct link to comment

    I only have one credit card and I use it for large purchases so I can get the reward points. I pay it off right away and at the end of the year, I cash in the points and use it for Christmas. It’s a routine that has worked well for me

  • SavvyJames , Direct link to comment

    Utilizing credit cards to build credit history and improve FICO scores has some merit, particularly for younger people looking to buy vehicles or a home. However, individuals definitely have to be disciplined and careful in their use of plastic. It is easy for the use of credit cards, and resultant debt, to get out of control.

  • Tawcan , Direct link to comment

    My favourite part is definitely getting cash rewards or travel points back. I just redeemed about $1000 worth of travel points. 🙂

  • Alexis , Direct link to comment

    I like to take advantage of the special rewards for Southwest through credit cards. I used to never care about special rewards until my sister pointed out that she saves a lot through a SW card. Pretty awesome!

  • Myles Money , Direct link to comment

    Credit cards make spending easier and as a consequence that means it’s easier to get into debt. If you can use a credit card responsibly then there’s no problem of course, but if people are financially unaware (or if they just love shiny stuff and can’t resist the temptation to spend money they don’t have on expensive toys) then I would suggest that credit cards are potentially dangerous. It’s about knowing yourself and being able to control your spending. And if you know you’re weak when you have the magic plastic in your wallet, maybe it’s better to leave it at home.

    • Lauren , Direct link to comment

      Very true- the benefits are really only there for the responsible users. Otherwise, it just leads to trouble.

  • Worli , Direct link to comment

    Absolutely! Credit cards are a valuable tool in today’s society, and come with many benefits including improved cash flow and buyer security. However, it can be dangers too, and if they are used badly or you are unaware of the potential problems, you could end up paying out a lot of money and getting into debt. If you are prone to excessive spending or if you find yourself consistently unable to pay your balance every month, these cards are probably more detrimental than beneficial for your situation.

  • Kate @ Cashville Skyline , Direct link to comment

    Brad from Richmond Savers, the ultimate credit card awards hacker, said I’m spreading out my rewards too much right now. PenFed for 5% cash back on gas, AmEx for 6% cash back on groceries, Barclays for everything else to get miles. I’m on the lookout for the next great bonus and plan to consolidate for an international trip next year.

  • Erin @ Journey to Saving , Direct link to comment

    I love the picture of the cat! =) I agree that credit cards have a lot of benefits as long as you can use them responsibly. Tracking my spending is so easy when I just have to refer to one statement. We also have a Kohl’s card as you seem to need it to take advantage of all their major deals!

  • Mr. Frugalwoods , Direct link to comment

    Credit card rewards have sent us on some amazing trips, and continue to provide a good source of cash back on our regular spending. All without having ever paid any interest! I’d say that’s a pretty good deal.

    It’s also great because I never need to carry cash. I’ve had $2 in my wallet for the past couple of months. No need for more, and I haven’t managed to spend it yet!

  • debs @ debt debs , Direct link to comment

    Totally agree, Lauren. I’m all for credit cards for rewards, as long as you pay them in full every month. If not, they’re not worth it ~ stick with cash!

  • Michelle , Direct link to comment

    I am all about using credit cards for their benefits. I love credit card rewards and I plan on churning them again to earn more rewards!

  • Aldo @ Million DollarNinja , Direct link to comment

    Credit cards are not bad as long as you pay them off each month. I don’t avoid credit cards, but if somebody is having trouble paying their debt and paying off their credit cards each month, I recommend them to stay off them for a while.

    There are definite advantages of having and correctly using credit cards.

  • Shannon @ Financially Blonde , Direct link to comment

    Erin and I just recorded one of my first podcasts and we spoke A LOT about the benefits of credit cards. I am sure that people will hate on it but they do serve a purpose and they can be a valuable tool for people to manage their money. If you have budgeted to spend a certain amount any way, why wouldn’t you get rewarded for it through points and incentives?

    • Lauren , Direct link to comment

      Oh I look forward to hearing that! I think cards can be excellent tools, but you have to be smart about it.

  • Brandy @ bustedbudget , Direct link to comment

    I usually use my credit card points for Christmas every year. It feels like free money. When I was younger, I applied for a Victoria’s Secret credit card for the discount and was declined! haha, it was for the best lol

    • Lauren , Direct link to comment

      Ha, I got declined for several when I was younger, too. I’m definitely happy about that now!

  • Liz , Direct link to comment

    We use credit cards for all the reasons you mentioned. I like using plastic for spending because it’s easier to track like you mentioned. I avoid cash like the plague. I know some people say that credit cards make them what to overspend, but I’m the opposite. Whenever I have cash, I want to spend it : )

  • Holly@ClubThrifty , Direct link to comment

    Credit card rewards pay for the vast majority of our family travel- in a few weeks I am going on a $6,200 vacation I paid $197 for after using points and miles! =)

Comments are closed.