Credit Card Benefits: Why Credit Cards Provide Value

Credit Card Benefits: Why Credit Cards Provide Value


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Description - Find the advantages of having a credit card. View the key reasons why a credit card can be much more beneficial than using cash, checks, or debit cards. Discover the advantages of credit cards such as building a credit history and obtaining rewards.



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Published 11 October 2017
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Credit Card Benefits: Why Credit Cards Provide Value
Acredit cardis a wallet sized card issued to an individual or business by a financial entity. The card provides consumers with a line of credit for a specific dollar amount. For example, a credit card may allow a consumer to spend up to $5,000 with their credit card. They can use the card to purchase items or take a cash advance. The entity who receives the credit card payment for a purchase receives the money from the financial institution that issued the card. In turn, the person holding the credit card makes payments to the financial institution for the money they charged. The bank will commonly charge interest to the cardholder if they fail to pay their balance in full at the end of a set monthly billing cycle.
A credit card can be a very good resource if used properly. However, there are some inherent risks as well. Below is a list of some benefits of using a credit card:
Ease of Use In today's world, credit cards have become as good as cash in terms of where they can be used. If you have one of the major credit cards (Visa, MasterCard, Discover, or American Express), it is accepted at millions of locations across the world. Additionally, a credit card can be used at a place like an ATM or bank to obtain cash quickly through a cash advance. This should only be used in an emergency and paid off quickly to avoid the excessive interest and fees that are often associated with this type of transaction.
Establish Credit or Increase Credit Score If you routinely make timely payment on your credit cards, you will start to build or boost your credit. A good or excellent credit score often assists in helping you obtain a low interest rate on something like a mortgage or car loan. You will not only pay lower monthly payments on other debts but have access to additional credit if needed.
Grace Period Most credit cards offer a grace period, which typically gives you over 21 days to pay off your balance without owing interest to the credit card company. Basically, this grace period buys you time to pay off your debt before interest is due.
Some credit cards offer a zero-interest introductory period on purchases. You are given a zero-interest promotional period, we'll use six months as an example, where you owe no interest. You must pay off the credit card balance by the end of the promotional period to avoid interest payments.
Accounting History When you use a credit card, your transactions are efficiently tracked by the credit card company. You will have a record of your purchases or other transaction, which you can reference as needed. This is a nice feature of credit cards because it helps both individuals and businesses with their record keeping. If you are paying with cash or check, it is likely that your payments will not be as nicely tracked.
Fraud Protection & Detection Unlike cash where once it is gone, it is usually gone for good, a credit card can offer a layer of protection for fraudulent transactions on your account. If you lose your credit card and someone maxes out your credit card, you may be off the hook for the charges.
Cash Back & Other Rewards Credit cards often offer perks for using the card. For example, a particular credit card may offer 1% cash back on all purchase. Another credit card might offer airline miles based on your purchases. There are numerous rewards credit cards available, which offer quite significant benefits for using the card routinely. This is obviously a benefit you are not going to receive using cash, check, and most likely not with a debit card.