Credit cards are great financial tools to have, especially if you have something that you need to buy. It’s a convenient and secure payment alternative to cash and debit cards. If used wisely and correctly, you can save some of the money you’ve spent in the form of rewards and establish a good credit history. Here are some facts and benefits you need to learn before applying for credit card services.
What Is a Credit Card?
In essence, a credit card is a card issued by financial institutions that you can use to borrow funds so you can make purchases and payments with ease. Credit cards allow people to pay for different goods and services now with the intention of fully paying for them later on, with additional interest and charges. The payments for the credit can be made gradually or on the due date itself. Financial institutions give credit limits to control their customers’ spending.
Debit Cards vs. Credit Cards
Debit and credit cards may seem to have the same function, but the two are actually different. Although they both provide a convenient and easy way of paying without cash, debit cards pull funds from your checking account. They are removed from your account within 24 hours. Debit cards are also good for small and immediate purchases.
Credit cards, on the other hand, charge your purchases using a credit line. You’re only borrowing money with the intention of paying for it later. They are useful for emergencies or large purchases as long as you can pay for them on time. It is also great to use when you travel abroad. Most hotels, resorts, and car rentals prefer accepting credit cards to debit cards.
Benefits of Credit Cards
Credit cards are a great payment option to have. Now that you’re more familiar with what they do, here are some of the perks and benefits of applying for credit card services.
Convenience – One of the main benefits of using credit cards is that they are more convenient to use than cash. It takes up less space in your wallet and is generally accepted in most retail stores and business transactions. It’s easy to store and ready to use. If you somehow lost your card, your issuer or financial institution can send a replacement as long as you report it on time.
Record of Expenses – Your purchase history and records are conveniently listed in your monthly credit card statement. You can easily determine and track the things you’ve spent on for the last month. Some credit cards make year-end summaries, while others can alert you every time you swipe your card. This benefit is useful, especially if you’re doing your taxes or planning your budget for the entire month.
Rewards, Points, and Cashbacks – Many financial institutions that issue credit cards also offer a lot of rewards to their customers. Every time you use the card, you can earn a variety of bonuses. These can come in the form of loyalty points, air miles, discounts, and even cashback on certain stores. You can redeem the points you’ve already accumulated and get different types of incentives.
Purchase Protection and Security – Credit cards offer a lot of ways to protect you. When it comes to purchasing protection, credit cards offer additional insurance and security. This can really come in handy, especially if the item you’ve bought was either lost, damaged, or stolen. You can receive reimbursement or a replacement for it.
Credit cards are also generally safe and secure from fraudsters and thieves. Cards today come with a variety of safety measures to protect you and your money. Some of these features include chip and pin technology, fraud monitoring, and encryption. A lot of credit cards can also come with zero fraud liability policies. This means that whenever your card was used for fraudulent purchases, you never have to pay for any of it.
Improve Your Credit Score – When used properly and wisely, having a credit card can actually improve your credit score. Credit scores are used to evaluate whether the individual can pay for a loan or not. Having a good credit score shows the lender that you’re responsible with money and can pay on time. Credit builder credit cards are designed to help people with negative ratings get better scores.
Now you’re more aware of the benefits of having a credit card. Knowing when and how to use your card properly can help you achieve your financial goals.
