Depending on what decade you were born in, credit cards may be as familiar to you as a mobile phone, or as foreign to you as the concept of a professional video gamer (they exist). Credit cards didn’t really become a thing until the 1980s, and even then, it took a while for the public to understand them and use them.
People are creatures of habit, and asking people to change their habits is a tough thing to do. I remember recently still seeing people (mostly elderly folks) paying for their groceries in the supermarket with their checkbooks. Some people still have the habit of paying for things in cash whenever possible.
This article is for those of you still in the habit of using cash or debit cards for your purchases. I want to show you why you should strongly consider switching over to using credit cards for your purchases.
My History
My first experience with credit cards was in high school when my parents made me an authorized user of one of their credit cards. This card was for “emergencies” only, so naturally I never really used it.
After that, my first time getting my own credit card was during my first year in college. I don’t know how prevalent they are on college campuses now, but I got suckered into signing up for one of those credit cards with a nice picture/logo of my college’s name on it and got a free t-shirt out of it.
If you’re heading to college or have kids heading to college, I urge you to avoid these offers… you can get a much better credit card elsewhere. I didn’t know a lot about credit cards back then, but now I’m a lot more knowledgeable about them. I want to share with you the benefits of using credit cards compared to debit cards and cash.
Convenience
I find credit cards are easier to use than cash. Now, it’s arguable whether or not this is actually a good thing or not. Because credit cards are so easy to use, one can argue that it makes it easier for people to spend more money than they normally would.
While I can get behind this reasoning, I still prefer the simplicity of carrying around just cards vs having to carry cash with me. I only carry a total of 4 cards (including my driver’s license) with me at all times in a very simple wallet.
Also, transactions just happen quicker when using credit cards. No PINs to enter or counting money to make the transaction. And don’t even get me started on loose change!
Rewards
One of the biggest reasons why I think you should be using credit cards is for the rewards they offer. Now, every credit card reward system is different, some offer cashback while others may offer points or miles. But in general, you can easily earn back AT LEAST 1% of every dollar you spend, with many cases earning up to 3-5% back.
That may not sound like a lot, but this can be on EVERYTHING you buy with your credit card. Just imagine having a 3% OFF SALE for everything in your life; it can add up to something substantial.
Also, credit cards usually offer significant sign-up bonuses when opening new accounts. These can range from $100 to up to $1000 for a single credit card sign up.
As an example, you can earn 150,000 Hilton points simply for signing up for their credit card and meeting a minimum spend requirement. That’s enough points for multiple night stays at various Hilton properties.
Purchase Protections
While coverage may vary depending on the card, many credit cards offer various forms of purchase protections for consumer goods. One common form of purchase protection is extending the manufacturer’s warranty, usually up to an extra year.
Another form of purchase protection is covering new purchases from damage or theft, usually within the first few months of purchase. This can be a huge lifesaver, especially when dealing with consumer electronic items.
Travel Protections
Many credit cards offer benefits related to travel when you use the card to pay for your travels. They can cover you if your luggage is delayed or lost.
They can also cover hotel and food expenses you may incur if your flight is delayed long enough.
In a worst case scenario, credit cards may also cover medical evacuation costs while you are travelling. Granted, these are all benefits that you hope you never have to use, but it is great to know that they are there if you ever need them, just with using your credit card to pay for your travels.
Car rental insurance
Whenever you rent a car through a rental agency, at the counter they always ask you if you want to pay for the collision damage waiver. This is coverage for any damage that may occur to the car during your rental. Usually, it is a per day charge that can quickly increase your rental cost if you opt for it.
Another travel related benefit some credit cards offer is coverage for rental car damage. It’s important to note that while many credit cards offer this benefit, most of them act as secondary coverage. This means the credit card coverage only kicks in after your own personal car insurance policy (if you have one) is exhausted. At that point, your auto insurance renewal cost will likely go up.
However, there are several credit cards available that offer primary coverage for car rentals. This means that if you opted out of collision damage waiver and damage occurs to your rental car, the credit card will cover the damage costs without you having to tap into your personal car insurance coverage.
Liability Protection
If you use cash or debit card for purchases, the money leaves your hands at that moment. If the goods or services you purchased are not up to your expectations, it can be difficult to retrieve your money back if there isn’t a good return/refund policy.
With many credit cards, if you have issues with any transactions, you can file a dispute with the credit card. With this, the credit card company will investigate your claim on your behalf and if qualified, can refund you the money.
Another protection credit cards offer is that you are generally not liable for any unauthorized charges made on your card, as long as you notify the credit card in a reasonable time. If your credit card number is somehow stolen and used to purchase something, you would not be liable for any charges.
If this were to occur with an ATM or debit card, you have less liability protection. This is because the money used for debit card transactions is pulled straight from your checking account, which is harder for banks to recover.
Spending Tracking
It is a lot easier to keep track of your transactions when you use credit cards. You can get a summary at the end of the month on your credit card statement, or you can use an online tool like Mint or Personal Capital to aggregate all your transactions.
While this benefit also applies to debit cards, it is a lot more difficult to do with cash transactions unless you are very on top of it. Using one of the aforementioned online tools also makes it easier to categorize your transactions and see where you’re spending your money and whether you are staying within your budget.
When you should NOT be using credit cards
As you can see, there are multiple reasons why I think you should be using credit cards instead of cash or debit cards. However, this doesn’t mean I think everyone should be using credit cards. I don’t think you should be using credit cards for purchases if:
- You can’t pay off your credit card balance in full each month – If you don’t have enough money in your checking account to pay off your credit card balance in full each month, you should work on a budget first and saving more money. The last thing you want is to carry a balance on your credit cards and accrue interest on your balance and falling into a credit card debt spiral.
- You spend more loosely when using credit cards – I imagine this would also apply if you’re using debit cards, but as I mentioned earlier, the convenience of using plastic can sometimes urge people to spend more loosely than if one were handing cash over for a transaction. The idea is similar to the reason why casinos use colored chips at their games instead of cash; it dissociates the value of the money from your hands to make you feel like you’re not actually playing with real money. If this is a problem you think you may have, using cash may be a better idea for you.
Final Thoughts
Cash may always have a place in our society, but if trends indicate the future, we seem to be naturally moving towards a cashless society. As I’ve outlined in this article, there are many benefits to using credit cards compared to debit cards and cash. These are:
- Convenience
- Rewards
- Purchase Protection
- Travel Protection
- Car Rental Insurance
- Liability Protection
- Spending Trackability
Hopefully, you are either using credit cards already or I’ve shed some new insight on you to make you consider using them for everyday spending. Let me know in the comments below if you are still using cash or debit and why.
