here on credit cards as friends or foe.
Why Use a Credit Card?
In this article, we will espouse the benefits of using a credit card for everyday purchases. I have personally been using credit cards for nearly all of my purchases for the past 12 years. During that time period, I have discovered that the benefits of doing so are outstanding, so long as I am using the credit card correctly.
Not only am I earning solid cash back rewards but I’m also extending the amount of time that my money is making money for me. I also find it much easier to complete a budget day with utilizing one or two credit cards for most of my purchasing needs. The systems for tracking spending habits on the credit card websites are now better than ever.
Before we get into the benefits, let’s explore what you will need to do to make this work.
- Pay your credit card bill in full, on time, every time.
- Have enough money to cover your credit card purchases.
- Never incur any extra interest, fees, or other expenses related to your credit card.
If you do these three things, this system will work. If you begin to waiver and let one of these principles slide, credit cards will not work for you and you should not use them! Cash only will be your friend.
Keep in mind that if you practice these three principles above, credit card companies refer to you as a ‘dead beat’ because they do not make any money off of you. Quite the interesting terminology!
Pros of Using Credit Card
For those who are willing and able to stick to these principles, here are MoneyByRamey.com’s top 10 benefits of using credit cards for making everyday purchases:
- Cash back rewards
Cash back rewards are the top benefit to utilizing a credit card for everyday purchases. So long as you are not incurring any fee using your credit card, any cash back rewards are pure profit in your pocket. The only work on your end is to buy things that you already buy! That is a great opportunity to ‘earn more’ by doing less.
- Purchase guarantees
This benefit is probably not known to many individuals but definitely worth researching. If you have a credit card and make a purchase with that credit card, often times the card will have an insurance policy should anything happen to that purchase or if you have an issue.
For instance, I once booked a rental car with my Discover card. The rental car got sideswiped during the night while parked on the street. Because I used the credit card to make the rental car purchase, the card paid for the damages to the vehicle. This is a pretty awesome (though not very well advertised) benefit. Remember to read the terms and conditions closely, especially the benefits section.
- Much easier to dispute purchases
If you purchase something with cash and you need to make a return, unless you’re dealing with a large reputable retail chain, it can be a challenging endeavor to get a refund. Enter the credit card; if there is a purchase on your account that you didn’t approve of or a service that didn’t quite stack up, you can put the charge in dispute and potentially have it reversed. I don’t recommend doing this very often but it’s nice to know that you have this type of ability when utilizing a credit card for everyday purchases.
- Extend the cash cycle of your money
Being able to invest my money longer and not having to pay for my goods and services right away is an amazing financial concept. Whether my funds are sitting in a Money Market Savings account or in the stock market, those funds are going to work for me! At minimum, a credit card let’s me extend my cash cycle an extra 30 days; at maximum, it is 60 days. An example: let’s assume my statement closes on the 26th and generates on the 27th. This means any purchase done on the 27th will not be on the 26th statement but rather on the next month statement. If I have a large purchase to make and strategically wait until the 27th to make it, I get 60 days to pay for that good or service. That is a fantastic use of my money!
- Not needing to carry loads of cash
This is pretty self-explanatory. While I do carry cash on me at all times, not having to haul around $500 for the next new big purchase is a life saver. I still like cash, just in much smaller increments.
- Leveraging for Deals
I often find that the credit card companies fight for my business. It’s not uncommon to get a credit card company to send me a $200 cash back reward offer in the mail so long as I utilize their card for purchasing for the next few months. Easiest $200 I will ever make (besides dividends).
If you are carrying around cash and you lose your wallet or worse, you get mugged, then your hard earned money is gone forever. However, with a credit card, if you end up losing it, you simply call in and cancel the card, any charges that were made by Mr. Robber should be credited back, and a new card will be on the way. Pretty easy, huh?
- Utilize Great Technology
I utilize credit card websites in my budget day procedure. Not only can I get a quick high level snapshot of my purchases and overall balance, but many credit cards are now offering services that go above and beyond. One credit card even has a spending analyzer which shows me a category breakdown of where I am spending my money.
- Ease of Purchasing
Purchasing is so easy with a credit card (which can be a good and bad thing). In looking simply at the good thing, most retailers will be set up to allow you pay with a credit card. And if they don’t, the 21st century called and they need to get with the program. I find that it is simple to pull out my credit card, insert the chip reader and let technology do the rest. For me it also plays into my minimalistic tendancies – less cash, no need to keep receipts, and otherwise less paperwork. Beautiful.
- Practicing Minimalism
My 10th reason on why I like to utilize credit cards is minimalism. I used to keep each receipt I ever received so that I could input it into my budget. Now I realize that I don’t need to keep receipts any more as I have all the tracking power in the cloud-based technologies. For me, it’s a lovely feeling to have a razor thin wallet with two credit cards (one back up, just in case). Being light on my feet is a great way to go about my day.
So as you can see, if utilized right, credit cards can be one of an investors greatest cash-flow enhancing tools. Do you use credit cards? Why or why not? Comment below!
Disclaimer: (1) All the information above is not a recommendation for or against any investment vehicle or money management strategy. It should not be construed as advice and each individual that invests needs to take up any decision with the utmost care and diligence. Please seek the advice of a competent business professional before making any financial decision.
(2) This website may contain affiliate links. My goal is to continue to provide you free content and to do so, I may market affiliates from time-to-time. I would appreciate you supporting the sponsors of MoneyByRamey.com as they keep me in business!