Credit cards have become a crucial tool in the world of finance today but many people are becoming wary of it. This is because of the ease with which people get into debt with it. However for people who have financial discipline and use this tool responsibly, there are many benefits to be gained from it.
Sometimes, some people wonder whether it is really necessary to get and use a credit card. We make bold to say that this plastic money as credit cards are also known is an essential tool for financial growth. As we progress in this article, you will see reasons why it is an essential tool. We’ll also look at what Norwegians refer to as fordeler med kredittkort, or the benefits of credit cards in English.
Table of Contents
Reasons to Use Credit Cards
Like we mentioned briefly, some people might ask why they should use credit cards seeing how some people have gotten into debts with it. We would list and explain below some reasons why you should use this financial tool.
Increased Consumer Protection
Many economist advice consumers to use plastic money to make payment for purchases when they travel, buy things online or make huge monetary transactions. This they posit is because the card protects the holder in case the product is faulty or a fraud is attempted on their account or there is the issue of bankruptcy.
Plastic money is usually more secured than bank cards, cash or transfers. This is mainly because the money you spend is not yours but the issuer’s. So according to the Financial Contracts Act, the card issuer and the seller are duty bound to make sure that you get the product you used your plastic money to purchase.
Your Account Cannot be Hacked by Fraudsters
As we have said before, plastic money is a safer payment option in most instances. Additionally, it is not easy to empty the account of a consumer with their credit card. However, this is a possibility with a bank card.
This is because of the statutory obligation of the issuing company to the consumer. If for any reason a card holder is defrauded through their plastic money, the issuer bears the responsibility of preventing the fraud; therefore the consumer will not lose their money. There are also some authentication factors that help give extra security to your transactions.
Emergency Funds
Having plastic money gives you access to emergency funds when you run out of cash in your checking account. This comes in handy especially when you are on a trip or during holidays. It ensures that your trip is not spoiled or that you do not have to look for where to borrow money from.
If you handle your credit card responsibly by not withdrawing cash and making your payments as at when due, you will not accrue unnecessary interest payments.
Free Insurance
There are a number of credit cards that come with free travel insurance when you pay half of the travel costs with the card. This insurance will cover your family and your co travellers (if you are traveling in a team) but there may be some restrictions.
Some insurance covers that may also be included are ID theft, tank failure extra rental car, missed flights and purchase insurance policies. Check out this page for more insight on credit card insurance: https://www.personalfn.com/.
Savings
When you choose the right credit card for you, you get to save some money in the long run. The savings can be from cash back rewards or discounts on purchases made with specific cards.
Although at first glance the amount may not look substantial but at the end of the day when you add up free insurance plus discounts and cash backs, you’ll be amazed at the cumulative sum. However, it is important to bear in mind that you can lose that entire savings to payment of interest if you default in your monthly payments.
Better Overview and Control of your Finances
Having different cards for different expenses is a great idea for responsible users. For example, you can have plastic money for only work expenses and another one for personal expenses. This makes it easy for you to keep track of work related expenses and personal expenses.
This works for any type of expenses that you have separate cards for. You can sign up for SMS notification of transactions real time; this will further alert you to how much you are spending per time.
Global Purchase Possibilities
Since some credit cards are accepted globally, they open up limitless purchase possibilities for the holder. Brands such as MasterCard and Visa are accepted almost everywhere in the world. This means that holders of this option can never be financially stranded anywhere.
Benefits of Credit Cards
We have emphasized more than once so far that the key to enjoying the benefits of a credit card is responsible usage. Some of the reasons we gave why you should use plastic money can also be counted as benefits or advantages of using this financial tool. However, we will go on to highlight some major benefits of using this tool:-
You can Earn Rewards
Getting rewarded for using your card is one great advantage or benefit of using it. However, it is important to note that there are different systems of reward from different issuing companies. Due to the proliferation of these reward systems, you need to do your due diligence to find the system that will benefit you the most.
Below we list and explain some of the reward cards that are available so that you can know at a glance whether it will be worth your while or not.
- Cash Back – Options that come with this reward give consumers reward for daily purchases such as gas, entertainment, dining out and groceries. When you make a purchase that meets the qualification requirement, you get back a percentage of the amount spent. This is a good option for people who want straightforward rewards.
- Points – This is a reward system that allots points for different purchases or transactions. Qualifying for these points, the way they are calculated and disbursed differ from one issuing company to the next. Some of cards with this kind of reward sometimes work like cash back options. If you are considering cards with this reward option, ensure that you understand all that it entails before you sign up for it.
- Travel – This reward option is great for people who do a lot of travelling so if you are in this category, look out for travel credit cards. With these options you earn points on certain purchases and reward miles. With these points or reward miles, you can get airline upgrades, cruises, rental cars, hotels, vacation rentals and a lot more! There are even options that allow you redeem your points or miles on things that are not travel related too.
Bear in mind that these reward cards operate under different terms and conditions based on the issuing company. This therefore means that you cannot make assumptions; you must ensure you get all the details and understand them before you sign up for any reward card. Also do not forget to factor in your lifestyle so as to get the right fit for you. Read this article for more tips on reward cards.
Helps to Build your Credit History
One thing that lenders often look at when negotiating interest rates and other terms and conditions for loans is credit score/history. A good credit score therefore helps you to qualify for better interest rates and other terms and conditions.
Additionally, a good credit score can even help you get some kinds of jobs or rent apartments in certain locations. This therefore means that a good credit score is non-negotiable for anyone involved in any financial transactions. However, people who have poor credit scores can improve it by responsibly using credit cards.
You can use plastic money responsibly by making your monthly payment in full and on time. Another way is by keeping your use of credit to the lowest minimum; do not max out your card(s). Staying below the limit consistently will also help. One type of card that can also help you build or improve your credit is a secured card.
Protection against Unauthorized Transactions
Credit card fraud is an unfortunate incident and it can befall anyone. Thankfully however, a good number of credit cards come with systems that protect the user against unauthorized charges. This means that your money is safer.
This coverage and other security features differ from one issuing company to another. Below are some safety features that you can get:-
- Zero liability for unauthorized transactions – You will not have to pay anything in the event that an unauthorized transaction occurs on/through your card.
- Security alerts in form of notification about any suspicious activity on your card
- You can easily lock or unlock your card in case it’s stolen, lost or misplaced.
- Virtual card number that you can use for online transactions which frees you from using your actually card number.
Conclusion
We have taken time in this article, to discuss reasons why you need to use credit card(s) and also the benefits of using them. Additionally, you would have noticed that we kept emphasizing on the need for responsible usage. This is highly important if you must maximize the benefits of plastic money.
It would be remiss of any consumer to just up and pick the first credit card that catches their fancy; this is because it might not be the right fit for their lifestyle. So remember that doing your due diligence and understanding all the terms and conditions of the card you choose is the first step to enjoying the benefits of this financial tool.
