Credit cards have earned a deserved, bad reputation in the wake of the recent years of economic turmoil. It isn't the card that's inherently bad; it's often the reckless spending habits of the consumer. By the end of 2015, each U.S. household reporting credit card debt owed nearly $16,000, according to NerdWallet. At the same time, for Americans who can prudently use credit cards and stay atop their balances each month, these rotating credit accounts can have a positive effect on their credit and purchases.
Here are six reasons you need to use a credit card:
1. Interest Savings on Promotional Cards
Credit card companies dangle promotional offers that allow customers to transfer existing debt with zero interest for up to 21 months as well as zero interest on new charges for the promotional period. Caveat emptor: If the new customer hasn't paid off the transferred amount by the closing date, the interest rates reset at teeth-rattling heights.
Banks, airlines, hotel chains, and big-box stores may offer cash-back annually for consumer purchases using their cards. Frequent flyer miles are really designed for business customers, but independent consumers will find bonus deals that grant a chunk of miles just for signing up. Reward programs are enticing, but may cause cardholders to use their products and services at higher rates than those at their competitors.
3. Instant Access to Online Shopping
You take the good with the bad here. Web-savvy consumers can find instant offers of slashed prices on products and services, plunking down their credit card at just the right time to land a deal. At the same time, shopping by smart phone or computer can begin to seem like a video game, except in this game consumers make impulse purchases they'll regret at the end of the billing cycle.
4. Better Credit Ratings
Those who make timely payments will likely see improved credit scores. Students newly away from home can actually begin a solid credit history by using their cards intelligently. But those who carry huge balances, extending their debt through more spending, and in effect use up their available credit may see their scores drop.
5. A Handy Security Blanket
Getting caught without cash at the restaurant is hardly a life-changing event. But facing emergency surgery, having to put new brakes on the car, or buying a last-minute flight for a family crisis are all sound occasions for putting it on the card.
6. Purchase Protection
Many credit cards come with consumer protections built into their agreement. The card company can offer product warranties, return policies and insurance on products and services. There's an automatic grace period when you use a credit card over a debit card. With the debit card, the money is withdrawn immediately. With a credit card, the consumer decides at each month's billing date how much to take out of the account towards the purchase. This can also be important in disputes: the credit card company will remove the charge while it's under dispute, while the money goes to the seller immediately via the debit card.
Searching for a card offer? LendingTree helps consumers find the best card for their current credit rating, from scores of 549 or less, up to 640 and higher.