The Benefits of Using Credit Cards

benefits of using credit cards
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For the majority of students out there I think it is probably most important that they first understand the dangers of credit card usage before they find out about some of the benefits. I have seen too many students not understand how debilitating 19.99% compound interest can be; however, for those of you that have a good grasp on your spending habits, there is definitely opportunity to take advantage of some of the benefits of credit card use.

Related: Why Credit Cards Are Dangerous For Students

Benefits of Using Credit Cards – Manage and Build Credit

First and foremost, the number one advantage for a young person getting a credit card is to learn to manage credit and to build a credit rating.  Some parents out there believe in advising their child not to get a credit car for fear of overuse. Why not teach them about how to properly use credit and what interest is instead? If you graduate from school and are looking to buy a vehicle or even a house and have no credit rating, there are only two things that can happen. The first is that you won’t be able to get the credit you need (quite likely in the case of the house), or the seller will be able to justify jacking the interest rates way up on you because you will be considered a high risk. Yes, I know, not ever going into debt paradoxically makes you a credit risk. I’m not saying it makes a lot of sense, but if you have no credit rating and you buy a car with monthly payments, that is definitely going to cost you quite a bit of money over the life of the loan.

Related: Tracking Your Expenses – The First Step to Budgeting

They Can Pay You!

There are some other, more fun advantages to owning a credit card as well. Credit card companies make so much money on people that get into debt trouble that they can finance all of these creative plans to get their product out on the market. If you have the discipline to pay your balance off every month (so you don’t care about the interest rate) then you can use these creative plans to your benefit. These incentives to use credit cards usually fall into two categories: cash-back cards, and rewards cards.

Related: Best Cash Back Credit Cards

Best Credit Cards Canada



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Rewards

Reward cards can promise everything from tires to store gift cards, but what they are most commonly used for is air miles. The new Aspire Capital One card is commonly considered the king in this area as it offers two reward miles for every dollar spent. I won’t get into too many details, but a quick Google search can give you a detailed comparison of rewards cards.

I personally have a cash-back card, mostly because my credit rating and annual income coming out of university were not good enough to get the above card and this one came free with my banking account. It gives me 1% back on all purchases and 5% on groceries and gasoline (when you combine this with my co-op dividends I get back, I save 11% on all my gasoline purchases). I pretty much buy everything I can with it and then just pay it off at the end of the month. As a bonus, it allows me to track my expenses fairly easily.

Other Good Stuff From Your Cards

Some other random advantages that you should look for in the small print of your agreement is free insurance if you’re travelling, flight cancellation insurance, and built in warranty if something goes wrong with a transaction. It’s also obviously much safer to carry around than cash. Finally, it allows you do a lot of shopping online which can save you a ton of time and money.

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I love my credit cards for that same reason.

They help fund my traveling addiction with the points I accumulate.

I think as long as they can be used responsibly, they are a good tool in the personal finance war ;)

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