The Benefits of Credit Cards

Credit cards are a modern-day marvel and they are surely one that we are all familiar with, no matter what part of the country or world you’re from. Both Mastercard and Visa are global giants and they’ve done a great deal to bring about change within the financial processes of the modern world. Plastic credit cards play a tremendous part in the world we live in today and without them the world would be a much different place. We rely so heavily on credit that there are now cashless businesses that only accept credit and do not take any form of cash at all.

The Benefits of Credit Cards

We all love credit cards for their convenience but there’s no doubt about it, credit cards come with a good deal of benefit and utility. Firstly, credit cards are great for making purchases since they act as a buffer from your direct bank account. When you use a credit card you are protected from the purchase in that you can dispute it with the vendor/merchant within a given time period. Your credit card company will also go to bat for you if required and you need to dispute a charge that was placed on your card. You are not afforded this luxury when you use a debit card. Unlike credit cards, when you use a debit card, the money is directly taken from your bank and getting it back is a much more significant process (if you can get it back at all). Without that barrier provided by a credit card, if there’s a fraudulent charge on your debit card, a lot of times that money is simply gone and there isn’t much you can do about it, this would not be the case had you used a credit card. Secondly, credit cards come with their own points-based rewards system and cashback and various perks for cardmembers. These perks and rewards vary but they are meant to encourage use of credit cards.

Downsides to Credit Cards

With credit cards consumers can unknowingly spend more than they would if they were to use solely cash. The convenience of credit cards makes us more inclined to spend more unknowingly and can allow us to fall into numerous spending traps and cause financial mishaps to occur. Psychologically speaking, credit cards are easier to spend money on then with cash so therefore they make falling into spending traps easier. Excessive credit card use, if not properly maintained, can also lead to credit card debt and a vicious cycle of minimum payments. Some credit cards use comes with a surcharge, which like in the state of New York can cost customers an additional 4%. Merchants and vendors pay more money to be able to allow customers to transact with credit cards so the brunt of that cost is typically being passed onto businesses and small businesses (unless a merchant surcharge is added on to your bill).

Credit Card Debt

This is one of the main downsides to credit cards although, it really remains to be seen since more often than not, it’s not the tool that’s the issue but how we use those tools. Although you can’t get into credit card debt without access to credit cards, we can’t entirely blame credit cards for credit card debt. They are a tool that has both benefits and downsides.

How to Look for a New Credit Card

When looking for a new credit card, it’s important to look for a credit card that will align with your goals. If you have already have a great travel rewards card then maybe focusing on acquiring a great cash back rewards card. There is a best amount of credit cards to have, beyond this, the goal is not to go overboard but to maintain moderate but strong credit. You really shouldn’t see a need to have more than more than 3 cards total, 1 for cash back, 1 for rewards and 1 as a backup.

Credit cards are not without their benefits but they are a tool at the end of the day. A tool to help make purchasing more convenient and giving you access to credit. However, we should still look to avoid interest payments whenever possible, just because we benefit from credit cards doesn't mean we have to pay interest for their benefits.