Believe it or not, there are instances when it is better to use credit cards instead of other payment methods. The convenience of not having to carry cash with you is the main reason for that. But if that is your only reason for using credit cards, then it is not much different from debit cards. The latter will also give you a cashless experience – except that it uses cash from your account directly. That makes it seem like you are using cash because it is directly taken from your bank account. If you do not have money in your account, then you cannot proceed with the transaction.
Credit cards, on the other hand, will get the funds from the creditor. Obviously, that will put you in debt. Whatever you paid through your credit card will be paid back to the creditor at a later date. Since credit card payments are paid with interest, most people are advised to stay away from debt by being smart when they use credit cards.
However, some people are finding it hard to control the way they spend on their credit cards. It does really feel like an extension of your wallet. This is probably the mentality that caused people to add $67 billion in credit card debt just this 2018. That makes the total credit card debt more than $1 trillion.
The truth is, the high credit card debt is not really that bad because people are still showing signs that they can afford to pay it back. Not only that, there are expenses that are better off if you use credit cards. – even over debit cards.
7 expenses that should use credit cards
The main reason to prefer the use of credit cards over debit cards and cash is for security reasons. According to statistics from the government, there are more fraud cases in 2017 and most of them are targetting card transactions. Between credit and debit cards, you are safer with credit cards because you are not really using your own money – yet. With debit cards, the transaction can only be completed after the money is taken from your account. But when you use credit cards, you still have some time to dispute any expense if it turns out to be an unauthorized transaction.
But there are more reasons to prefer the use of credit cards. You will realize this as we go through the different expenses below.
This has steadily grown in popularity over the years and it is expected to just keep on growing. It is better to use credit cards for online purchases because there is an extra layer of protection when cybercriminal intercept your data. All they need is your card number to drain your account. If you use a debit card, they can instantly drain your account. But with credit cards, you have the right to dispute transactions that you did not make. The creditor is required to investigate and if it is linked to cybercrime, you can have your money back.
It only takes a few seconds or minutes for a criminal with a card skimmer to put your finances in danger. Unless the restaurant is equipped with a handheld card terminal, you should opt to pay your meals in cash. If not, use a credit card. The same dispute right is also in effect here and can protect you.
There are so many reasons why you should use credit cards for this expense. When you book a reservation, the hotel usually holds a certain amount on your card for security purposes. This happens for both credit and debit cards. The difference is that with debit cards, you really cannot use that amount. Even after you check out, it will take a couple of days to process the freeing of the funds. With credit cards, as long as you do not exceed your limit, you can still use it for other purchases.
Card skimmers, unfortunately, love to target gas pumps. So if you have to pay for gas, you are better off using credit cards. Even if they get your details, you have the right to dispute it so you do not get charged for transactions you did not make. Not only that, you can call your creditor to freeze your card so the criminals can no longer benefit from it. With debit cards, once they drain your account, it would be harder to recover your losses.
This is actually most applicable to car rentals. Using credit cards to rent a car will end up cheaper because you will not be charged a high fee. And just like with hotel reservations, any amount that will be held in your card will not really affect your ability to spend.
For other rentals like tables, chairs or other event related items, the deposit will not restrict your funds as well. The credit card can handle the held amount because technically, it is not really your money that is made inaccessible.
These can cause a huge drain in your finances – especially when you forget about it. This can quickly lead to overdrafts and will end up costing you. Overdraft charges are unnecessary expenses that you can live without. This is why you have to make sure that you use credit cards instead.
The extra layer of protection provided by credit cards will work in your benefit again. If you ordered equipment, furniture, or appliance that arrived with damages, you can easily dispute the charges to get your money back. It is easier to arrange for a return and exchange it for something better.
Since reports are coming in that identity theft and cyber crimes will never go away, it is a really good idea to take advantage of the benefits of credit cards. Although the government and businesses are trying their best to thwart the efforts of these criminals, we should also do our part in protecting ourselves.
How to avoid accumulating too much credit card debt
While credit cards can protect us from both identity theft and cyber crimes, that does not mean we should use it recklessly. You have to make sure that you use credit cards wisely so you will not land in debt.
Here are some tips that you can implement.
Budget your credit card use
If you plan to use credit cards regularly, make sure you include it in your budget. This will make you more cautious about how you use it. Give yourself a monthly limit. Once you go beyond that, you stop spending. When you max out your cards, it will cause a lot of negative effects. For one, it will have an effect on your credit score. But more importantly, it might be harder to pay it all off. Try not to put yourself in a position wherein you can no longer afford to pay your debts.
Pay off your debts in full every month
Since you are budgeting how you use credit cards, it should be easier to pay your full balance when the billing statement comes. Of course, that would mean you should stick to your limit. Not only that, but you should also stop yourself from spending the cash allocated for your credit card payments. When you pay your balance in full within the grace period, you do not have to worry about paying the high interest fees.
Monitor your interest rate
Speaking of high rates, you should take advantage of the fact that you are allowed to negotiate for a lower rate. If you have been good with your payments, like you are never late, the creditor might just relent and lower your rate. This will be useful when there are times when you paid for big ticket items and you have to carry over a balance to the next billing cycle. It will keep the finance charges from adding a lot into your balance.
Hopefully, if you follow these tips, you can use credit cards without being in danger of accumulating too much debt.