People find credit cards to be an excellent financial product because they can use them to buy many things.
They are used in grocery shopping, purchasing expensive items, and paying for accommodations and other services.
Some use them for jewelry, home renovations, or tuition fees because they don’t have the funds to purchase these items at their disposal.
There are a lot of advantages when you use credit cards. They are convenient, and you don’t have to carry cash and coins in your pockets.
Many merchants also accept them as payments when you dine in restaurants or rent a car. Some of the benefits that you might want to know about are the following:
- You earn mileage points and cash back when you use the card for travel
- Get your current balance and information about your limit for free through apps
- You can obtain your credit report free of charge
- Build your credit score over time by paying your balance on the due date
- Protect yourself against fraudulent transactions
- Foreign transaction fees might be waived
- They are not linked to your savings or checking account
- You can use them to put a hold on your hotel accommodations or vehicle rental
Whenever you make a purchase using the card, it’s always best to remember that the amount you’re using to pay is a debt you need to pay back on time.
This debt will have an interest rate that will accrue on each billing cycle. You’ll be given a specific annual percentage rate of APR based on your credit score, earning capacity, debt-to-income ratio, and many other factors.
People with a high credit score will generally get a lower APR and need to pay less each month than those with a bad credit history.
Differences Between a Debit and a Credit Card
Read: 4 Best Ways To Avoid Credit Card Debt
For one, a debit card is generally linked to your savings or checking account. You can only spend the funds that are present in your bank and nothing else.
You can withdraw the cash through an ATM, and there will be no interest charges each time you purchase.
For some banks and private financiers, you might get a cashback or a reward each time you make a purchase with their issued debit cards. There will be no bills that are due each month.
On the other hand, the credit one has a limit where you’ll essentially be making a loan each time you purchase something.
It carries a balance on top of the interest charges, and you’ll get a monthly bill. You can build credit with it, which can come with various benefits like cash back rewards, travel points, and other perks in qualified purchases.
Read: Factors to Consider When Choosing a Credit Card Machine
Your limit is going to be determined by your income and credit report. The available balance is the amount you can use and spend at a moment’s notice.
For example, if you have a limit of $5000 and you’ve spent $800, you will have an available balance of $4200 that you can spend according to your needs.
What are the Advantages to Know About?
If you’re financially responsible, you can use the right credit cards for traveling, earning points, and vacations.
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They can also be a convenient option when you need to fund an unplanned expense each month so you can begin to build your creditworthiness.
Some come in the form of a rewards card. This is when the holder gets substantial rewards when they are making a purchase.
Read: Reducing Payday Loan Defaulters With Credit Card Payment
They can use it in gas stations, grocery stores, cafes, and even in hotels abroad. Major issuers tend to partner with restaurants, hotels, and resorts worldwide to provide more convenience to their clients.
You can also get free miles and airport tickets using the points, especially if you want to treat yourself to a vacation occasionally.
These cards are excellent for traveling. They are often requested by car rental companies and hotel accommodations in different parts of the world before you can reserve or book something.
They also come with insurance which can save you a lot when you’re in another country. Since you’re not required to have specific funds in your account, your limit is essentially increasing your purchasing power by a lot.
You’ll have the funds during emergencies, and you can always buy a ticket to return home whenever you want.
Read: How To Check Free Cibil Score Online
Others are offering fraudulent services and alerts that will serve as your safety net in case someone stole your bag while you’re in a foreign location.
When there’s fraudulent activity, such as a large purchase, the warning signs will be sent via email, text, or phone call.
The transactions can be stopped, and no one will be able to gain access to your savings account. Others have the fraud liability guarantee where you will not get charged for any unauthorized purchases made using your stolen credit card.
How to Be More Responsible?
Like any other loans and financial products out there, you can only enjoy the card when you use it responsibly.
You need to decide how much you will spend each month and make sure you can afford to pay everything in full.
When you have a newfound purchasing power, handle it responsibly, or else you’ll be buried in debt.
It’s better to pay off your purchases in full at the end of each billing cycle so you will not acquire any added interest. Borrow only what you can pay in a reasonable time frame.
Utilize online calculators whenever possible and reduce your spending on things you don’t need.
Any impulse buying should be avoided, and don’t get tempted to get unaffordable buys you can’t pay for a reasonable amount of time.
Balance Transfer Options
Some credit cards have a balance transfer option where you can apply for a new loan, pay off the old balance, and get a lower interest rate.
This is a good alternative if you have to pay multiple creditors each month. The balance transfer option can be subjected to the new terms and interest rates, so you might want to take time when shopping for these offers.
See more about how they work on this site here.
The issuers can also give you a 0% APR for the first year as their introductory offer for their new members.
The applicants can pay less in fees and get a more affordable interest rate in general. When signing up for these offers, you should ensure that you have a higher score and always be responsible for paying off the balance so you will not accrue a lot of interest.
Application Process
You must decide which offers will be a good financial decision for you. You might want to go with an online issuer whenever you get rejected by the bank.
Overall, it’s always a good idea to apply to a bank, credit union, or private financial institution with which you’ve already established a relationship.
Those who regularly travel for work or leisure can use the miles or travel cards that various banks offer.
They can reap high rewards and points when using the card for everyday purchases. Cash backs can also be an option, especially when you go to a participating store.
The bonuses can be used to redeem gift cards, and you can usually see them applied towards the end of your billing cycle.
Other retailers may agree to exchange them with merchandise, so it’s important to know which ones would fit your lifestyle.
Compare and research the different providers to get the best deals and lowest interest rates.
Others will be more secure and provide easy checkouts on various websites, so make sure to inquire about their availability.
