Six Reasons to Use Your Credit Card

Six Reasons to Use Your Credit Card

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Six Reasons to Use Your Credit Card 

Even when wielded properly, credit cards are double-edged swords. Those who understand the perils of debt can reap their benefits. However, without the discipline to pay off your balance each month when it comes due, you can say goodbye to your hard-won credit score. 

Today, we’re going to consider the upside of putting your card to use; however, it still wouldn’t be prudent to proceed without a caveat—proceed with caution to ensure your credit history remains unscathed. 

1. To Earn Rewards 

Seeing as banks make money when you use your credit card, they’ve incentivized the process by offering clients a cut of their merchant fees.  As such, many companies offer reward credit cards.  For instance, the BMO® World Elite™ MasterCard® lets you earn rewards; cardholders get 3 BMO Rewards points per $1 spent on travel, dining and entertainment and 2 points per $1 otherwise. 

Plus, providers like Visa often give you the chance to pay off your bill with your earned rewards. Of course, rewards are only worthwhile if you’re paying your credit card bill in full. Otherwise, your “rewards” will be vastly outweighed by the interest rates you’ll pay..

2. Insurance and Consumer Protection 

Generally, major card issuers provide purchase protections for consumers. This means that if a fraudulent purchase is made on your account, you’ve been overcharged by a merchant, or you don’t receive an item you’ve ordered, your provider will foot the bill.  

Furthermore, well-rounded, free insurance packages are available with many credit card providers. You’ll receive coverage on the following when you travel out of the country: 

  • Medical insurance
  • Trip cancellation
  • Trip interruption
  • Baggage
  • Accidental death
  • Car rental

3. Credit cards help you build credit 

You might think avoiding credit cards altogether is a brilliant financial move because it’ll save you money (since you aren’t paying interest). Sadly ,however,  when you don’t put your credit card to use, you’re robbing yourself of the opportunity to build a credit history. 

Creditors possess a file that contains all the loans you’ve applied for, held, and paid. This will manifest itself as your FICO score (or adjacent rating systems). Responsibly using your credit card builds your score and proves that you’re a trustworthy borrower. A reliable history opens you up to lines of credit, mortgages, and other more substantial borrowing opportunities.

4. Credit cards can help in an emergency

Everybody’s been short on cash at some point in their life. That doesn’t mean your responsibilities and basic needs suddenly evaporate.

On top of that, sometimes, your rainy-day fund can’t cover surprise home repairs, car repairs, or medical bills. Holding a credit card allows you to pay those emergency costs, helping you through those challenging scenarios. It’s worth noting that many experts suggest keeping two credit cards in case both your debit card and your primary credit card are declined.

It might seem counterintuitive to spend money you don’t have. Yet, in unique instances, your quality of life demands that you rely on credit. Provided you’re responsible and strategic, you’ll pay these debts off in due time, which will bolster your credit history in the long run.

5. Cheap foreign exchange

Buying US dollars at a retail bank or foreign exchange booth in airports and hotels is often way too expensive to provide any value. This is why we suggest selecting those credit cards that give you the most affordable foreign exchange for non-Canadian purchases—and that don’t charge any commission.

Another benefit of credit cards when it comes to foreign exchange is the reduction of risks associated with carrying cash while travelling. Otherwise, you might be subject to expensive exchange rates and zero protection on foreign purchases.

6. They track your spending for you 

These days, it’s easy to track your credit card spending, whether it’s accessing your statement online, in the mail, or through mobile apps. There’s no need for you to manually record all of your purchases.

Tracking your own spending is likely the number one technique applied to successful budgeting and savings efforts. It allows you to notice mounting expenses you might feel are minor until you see the full scope of their financial damage. Having access to this kind of tool pays massive dividends in your short and long-term financial health.

Conclusion

There are many good reasons to put your credit cards to work. Committing to the disciplined use of your credit card will help your overall finances. Regardless, a healthy respect for the damage they can do is also prudent. So, the next time you receive a credit card application from your bank—don’t shy away. Instead, do your research and see if the terms make sense for you. 

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