8 Reasons Why Credit Cards are Better than Cash
The benefits of credit card use go far beyond convenience and emergency finance. Credit card companies make a lot of money from merchants when you use your card, and more and more card issuers are willing to give their customers a small piece of the action in one form or another for doing so. Shrewd card users can save money, protect their assets and even put extra cash in their pockets if they choose their plastic wisely. To help you get started, here’s a rundown of some commonly provided credit card extras.
Cash is king. Many cashback programs offer different amounts back for different categories. For example, they may offer 2% at gas stations and 1% at grocery stores. Some categories even go as high as 5 or 6% for some cards. Cards can also differ in how they give you the cash back. Some will give it to you as soon as you charge something to the card. Others wait until you’ve paid off your charges. Many card issuers require you to login to their site to manually redeem your cashback rewards. It’s also a common practice to only issue cash back rewards over a certain amount, such as $25 or $50, and often only in certain increments.
Before just about every credit card company was giving their customers cashback for purchases, they were giving away airline miles. Originally, airline miles could only be used on airfare, but today they can be often used on a wide variety of travel related expenses such as hotels, rental cars and the ever popular first-class upgrade. If you travel frequently, you may be able to get more value out of an airline miles card than a cashback card, but keep in mind you're locking yourself into a pretty narrow range of things you can buy and specific airlines.
Airlines and credit card issuers have been working together for some time now. In addition to cards offering airline miles, more and more airlines are offering perks such as priority boarding, a free drink or waived bag fees to cardholders.
Rental car insurance isn’t just limited to travel credit cards. In fact, it’s one of the most common perks. Usually the way it works is you pay for the car entirely with your credit card, decline the insurance that the rental car company will try really hard to convince you to buy, and you should be covered. Definitely read the fine print in your cardholder agreement before using this one though - it’s not one you want to get wrong. Carefully consider the insurance limits and what is and isn’t covered.
This one is arguably more a feature than a benefit, but we’ll include it here anyway. If you’re drowning in credit card debt on a high interest card, the credit card issuer is likely making some good money off the interest you’re stuck with. Not too surprisingly, other credit card issuers may want to get their hands on some of that interest. They may offer you a better rate and a balance transfer, so you can pay off your high interest credit card and roll your debt over to a lower interest one. Of course, you’ll still be paying quite a bit in interest. It’s not a substitute for just paying off your debt if you can. Do pay attention to both the introductory rate and the eventual rate that it’ll kick over to after the introductory period. You’d hate to be stuck in an even worse deal after 6 or 12 months.
This is yet another way credit card companies are paying customers to use their card. For people with good credit, it’s not uncommon to be offered a several hundred dollar sign up bonus. It usually comes with the contingency that you spend a certain amount on the card within some predetermined amount of time. The banks hope that the card makes its way into your wallet and daily life so that you continue use the card well after you’ve hit that limit. Usually cards with high sign-up bonuses don’t offer a ton of cash back, if any at all, and vice-versa.
Many credit cards also give you extended warranties or return policies on certain items purchased with the card. This is part of the agreement that merchants have to sign before they can accept a particular card. Sometimes it’s double the original warranty. Sometimes it’s a fixed amount of time. Usually there are limits too, so be sure to read your cardholder agreement when trying to decide which card to use for a major purchase.
If you have cash that’s lost or stolen, good luck getting any of it back. With credit cards, however, it’s a different story. Under federal law, your liability is limited to $50 if your card is stolen, provided you report the theft to the issuer within a reasonable amount of time after discovering it. If the card itself is not stolen, just the credit card number, and it’s used to make an unauthorized purchase, you cannot be held liable. For most credit card issuers, it’s more valuable to be able to advertise $0 liability than to very occasionally be able to collect $50. They generally waive the $50, remove all unauthorized charges and just replace the card for you.
It’s hard to believe there was a time when everybody carried cash for daily transactions. In today’s society, there’s really no reason to. Almost every business in the country that accepts payments directly from customers accepts some credit cards. It’s not just a matter of personal preference anymore. If you don’t use credit cards for your purchases, you’re losing out.
