It’s a simple fact in today’s world: if you want to establish credit, you have to use credit. Not everyone realizes that until it’s too late though. You can probably get by paying for most major purchases with cash but what about when you want to buy your first house? That’s why it’s actually a good idea to open a couple lines of credit and use credit cards from time to time. That way, when you need your credit score, you’ll have a lengthy history of established credit use.
Find out now: Which credit card is right for me?
When it comes to selecting a credit card though, what makes one card better than another? The industry is littered with advertisements for zero balance transfer cards and low interest rates but most savvy consumers pay off their cards every month in full and never spend more than they have in their bank accounts. For those types of consumers, credit cards can actually be a worthwhile investment.
Since many credit cards offer lucrative sign-up bonuses and cash back promotions on purchases, you can essentially receive “free money” just for using your card. And that’s not it, there are actually some ancillary benefits like purchase protection and insurance services when you use your card to pay for large purchases or car rentals that most people never take advantage of.
Since the credit card industry is so competitive, companies like Amex, Citi and Chase are all competing for your business. In order to try and win your business, they offer sign up bonuses ranging from cash and gift cards to airline miles and free hotel nights. If you’re going to be signing up for a new credit card, you might as well find one that offers a great sign up bonus. And unlike checking or debit reward offers that you have to pay taxes on, credit card bonuses are completely tax free.
Cash Back Rewards
One of the best reasons for paying for all your purchases with credit is the cash back offered by most companies. 1% cash back is the industry standard but there are tons of cards that offer more in certain categories. If you shop at Staples and Office Depot a lot for your business, you can find a card that pays 5x cash back on office related purchases. Otherwise, there are cards that will give you 2x or 3x back on things like groceries and gas. Usually, a mix of 2-3 cards will give you the most efficient cash back rewards.
If all those benefits aren’t enough there are some smaller items that most people are never aware of. Here are just a few of them:
Purchase Protection: This benefit protects purchases against loss or theft within certain time frame (usually 90 days).
Return Protection: If you pay for an item and the store won’t accept the return, your credit card company will take the item back within a certain time frame.
Roadside Assistance: If you need a tow or lock your keys in your car, some cards will provide roadside assistance for free.
No Foreign Transaction Fee: When you use your card abroad, you won’t have to pay the standard 3+% foreign transaction fees.
Finding a credit card that suits your needs doesn’t have to be hard. There are tools available that make selecting a card based on your needs extremely simple. Since more purchases are going digital, it’s almost essential to carry at least one credit card and as you can see it makes sense for some purchases to always be made with credit.
Photo credit: ©iStock.com/gutaper, ©iStock.com/LeoPatrizi, ©iStock.com/South_agency