The Advantages of Using Credit Cards: Better Protection, Rewards, and Building Credit

Updated on January 17, 2023

Discover the benefits of using credit cards for everyday transactions. Learn how credit cards offer better protection against fraud, rewards, and the ability to track spending. Find out how credit card use can help build credit, and how to use credit cards responsibly to avoid debt. Maximize the benefits of credit cards while minimizing the downsides with our expert tips.

Summary

Credit cards are widely accepted and provide better protection against fraud than debit cards
Credit cards offer rewards and make it easy to track spending
Using credit cards responsibly by paying off the balance in full each month is recommended
Credit cards are safer to carry and use than cash or debit cards
Credit cards can help build credit
Rewards earned from credit cards should not lead to overspending
Credit card transactions are recorded and can be accessed online in real-time
Credit card issuers automatically categorize purchases by the merchant, making it easy to understand spending habits
Credit card issuers let you generate reports to see how much you’ve spent in different categories in a given month, for the year to date, or for a period you specify
A good credit score can open many doors, such as making it easier to rent or buy a home, get approved for a cell phone plan, insurance, and utilities, and even increase your chances of getting a job.

Why Credit Cards Are a Better Option Than Cash or Debit Cards

In the past, cash was the preferred method of payment for everyday transactions, and credit cards were reserved for larger, infrequent purchases. However, today, credit cards are widely accepted and some individuals may not even carry cash. It is generally recommended by experts to use a credit card for purchases when possible. Credit cards provide better protection against fraud than debit cards, offer rewards, make it easy to track spending, and can help build credit. Additionally, using credit cards responsibly by paying off the balance in full each month, means that one can enjoy the benefits of credit cards without accruing debt or paying interest.

Credit Cards are Safer to Carry and Use

Carrying and using credit cards is a safer option than cash or debit cards. In case of loss or theft, cash is likely to be gone forever, whereas with credit cards, fraudulent purchases can be reported and the card issuer would bear the loss. On the other hand, if a debit card is used fraudulently, it may cause a temporary shortage in your bank account and cause inconvenience until the issue is resolved. This may result in bounced checks, rejected automated payments, and difficulty in paying bills.

The Benefits of Earning Rewards with Credit Cards

Using credit cards can be a great way to earn rewards. These rewards are designed to incentivize you to use your credit card and can be quite attractive. With a basic flat-rate card, you can earn back 1.5% or even 2% of every dollar spent, either as cash or points, or miles to redeem for travel or other purchases. For example, if you spend $1,000 a month, you could earn $180 to $240 annually without any extra effort. Some credit cards offer even higher rewards for specific types of purchases, such as groceries, gas, or dining out. By using a combination of these cards, you can maximize your rewards.

For example, say a family has four popular cash-back credit cards — the Upgrade Triple Cash Rewards Visa, Upgrade Visa® Card with Cash Rewards, PenFed Power Cash Rewards Visa Signature® Card, and The Owner’s Rewards Card by M1. Using them strategically, that family could earn hundreds of dollars a year in cashback:

MORE: Best cash-back credit cards with no annual fee

Avoid overspending just to earn more rewards. The small amount of cash back or points earned is not worth the additional expense, such as an extra $100 at the grocery store or $250 on clothing. Additionally, if you carry a balance from month to month, the interest charges can negate the value of the rewards earned, so it’s best to pay off your balance in full whenever possible.

MORE: Edfed’s best rewards credit cards

Tracking Spending Made Easy with Credit Cards

Credit cards can make tracking your spending easier. It can be difficult to keep track of your budget in general, but it can be especially hard to know where cash goes. Lost receipts can make it hard to remember how much you spent and where. With checks, you have to wait until they are cashed to track them and sometimes people take a long time to cash them. With credit cards, all your transactions are recorded and can be accessed online in real time. Additionally, many credit card issuers automatically categorize your purchases by the merchant, making it easy to understand your spending habits.

Most major issuers also let you generate reports to see how much you’ve spent in different categories in a given month, for the year to date, or for a period you specify:

MORE: Managing and Repaying Your Buy Now, Pay Later Debts: A Guide

Building Credit with Responsible Credit Card Use

Having a credit card and using it responsibly can help you build a good credit score. A good credit score can open many doors, such as making it easier to rent or buy a home, get approved for a cell phone plan, insurance, and utilities, and even increase your chances of getting a job. Employers sometimes run credit checks on job applicants. To improve your credit score, make regular small purchases, keep your balances low, and pay your bills on time.

MORE: How Canceling a Credit Card Can Affect Your Credit Score and What to Consider Beforehand

Be Mindful of the Downsides of Credit Card Rewards

When it comes to using a credit card, there are certain situations in which it may be best to opt for another method of payment.

Firstly, if a merchant charges an extra fee for using a credit card, it may be more cost-effective to pay with cash or a debit card. Additionally, if you want to support small merchants, it may be helpful to pay with cash or check to avoid them having to pay processing fees for credit card transactions.

Furthermore, if you struggle to control your spending, using a credit card with a high limit may make it harder to budget. In these cases, it may be wise to use a debit card or cash instead.

Overall, it’s important to weigh the pros and cons and do your research to find the best credit card for you, while also being mindful of how you spend your money.

Conclusion

In conclusion, credit cards offer many benefits over cash and debit cards, such as better protection against fraud, rewards, and the ability to track spending. By using credit cards responsibly and paying off the balance in full each month, one can enjoy these benefits without accruing debt or paying interest. Additionally, credit cards can help build credit, which can open many doors for future financial opportunities. However, it’s important to be mindful of overspending just to earn rewards and to be aware of the interest charges when carrying a balance from month to month. Overall, credit cards can be a useful financial tool when used responsibly.

Questions Answered in this Article

Why are credit cards considered safer than cash or debit cards? Answer: Carrying and using credit cards is a safer option than cash or debit cards. In case of loss or theft, cash is likely to be gone forever, whereas with credit cards, fraudulent purchases can be reported and the card issuer would bear the loss. On the other hand, if a debit card is used fraudulently, it may cause a temporary shortage in your bank account and cause inconvenience until the issue is resolved.
What are the benefits of using credit cards to earn rewards? Answer: Using credit cards can be a great way to earn rewards. These rewards are designed to incentivize you to use your credit card and can be quite attractive. With a basic flat-rate card, you can earn back 1.5% or even 2% of every dollar spent, either as cash or points, or miles to redeem for travel or other purchases. Some credit cards offer even higher rewards for specific types of purchases, such as groceries, gas, or dining out.
How can credit cards help in tracking spending? Answer: Credit cards can make tracking your spending easier. It can be difficult to keep track of your budget in general, but it can be especially hard to know where cash goes. Lost receipts can make it hard to remember how much you spent and where. With checks, you have to wait until they are cashed to track them and sometimes people take a long time to cash them. With credit cards, all your transactions are recorded and can be accessed online in real time.
What are the negative aspects of using credit cards to earn rewards? Answer: Avoid overspending just to earn more rewards. The small amount of cash back or points earned is not worth the additional expense, such as an extra $100 at the grocery store or $250 on clothing. Additionally, if you carry a balance from month to month, the interest charges can negate the value of the rewards earned, so it’s best to pay off your balance in full whenever possible.
How can credit cards help in building credit? Answer: Having a credit card and using it responsibly can help you build a good credit score. A good credit score can open many doors, such as making it easier to rent or buy a home, get approved for a cell phone plan, insurance, and utilities, and even increase your chances of getting a job. Employers sometimes run credit checks on job applicants.