Swipe with the plastic and start saving some cash! With good self-control on keeping frivolous spending to a minimum, having a credit card and using it wisely could actually save you money! Here are seven reason why you need to stop using your cash and start learning about the benefits of credit cards.
1. Convenience and Safety
It’s simply easier to make purchases with a credit card rather than always having to have enough cash on hand. Additionally, carrying cash can be risky. You could lose your wallet or worse, have it stolen, and if there were any cash in it, you might as well consider that money gone. But with credit cards, you can simply call up your credit card company, report it missing, and you won’t be liable for any questionable charges thereafter.
2. Easy to Track Expenses
All purchases made with a credit card are available online or via apps on a smartphone. Being able to instantly look up and track your transactions is much more manageable than keeping a stash of paper receipts. Receipts can be lost, damaged, and sometimes, too vague to recall what the purchase was.
Additionally, there are budgeting apps, such as Mint, that can keep track of all your spending by simply linking your credit cards and bank accounts. You can still budget with the app using cash, but you’ll need to describe what you’ve purchased every single time! Purchases made with credit cards however, are automatically categorized without further input needed.
3. Travel Benefits
You should always have cash when traveling, however credit cards do offer several benefits that can make your life away from home a lot easier.
- Better foreign exchange rates – Certain credit cards (such as Chase Sapphire Preferred) offer 0% foreign transaction fees on purchases made outside of the U.S. Additionally, the exchange rates are usually not only comparable to banks, but far better than airports or tourist area currency exchanges.
- Flying perks – With airline credit cards, there are special perks available when flying with that particular airline. 1) Faster boarding for economy flights, so you no longer have to worry about the plane running out of overhead compartment space for your carry-on, 2) first checked bag is free or discounted, and/or 3) savings on in-flight purchases, such as food and snacks.
- Rental car insurance – Most credit cards offer some form of rental car protection that can save you money from purchasing day-to-day insurance from rental car companies. However, make sure to read the fine print (or even call the back of the card) to determine exactly what is covered. For primary coverage, which is more comprehensive, consider certain premium cards (cards with a yearly fee) like Chase Sapphire Preferred or United MileagePlus Explorer.
4. Extended Warranties
Purchased items or devices can break down at any time. If it’s after the manufacturer’s warranty coverage, you may be out of luck. However, certain credit cards, such as American Express, offer an extra year of warranty on your purchased items. Therefore, it may be prudent to purchase more expensive, harder to replace items, such as electronics, with such cards for extended peace of mind.
5. Cash Back Rewards
Most cash back credit cards offer up to 1-3% cash back on all of your purchases. Some, like the Chase Freedom card, even offer 5% cash back on certain categories, like groceries, gas, and restaurants, rotated every few months. It’s like having a persistent coupon that’s always available!
6. Points and Mileage Rewards
Credit cards affiliated with airlines (usually providing frequent flyer miles) and credit cards that provide points on purchases are one of the best ways to save big on travel. In addition to the travel perks discussed above, airline cards provide miles that can be redeemed for flights that are either discounted or even completely free!
Furthermore, points accrued from credit card purchases, which are generally more versatile, can be redeemed for numerous rewards, including gift cards, cash back, hotels, car rentals, and again, flights!
7. Sign-up Bonuses
And last but not least, probably the most important reason that I use credit cards for, is their lucrative sign-up bonuses. How this works is after you sign up, you’ll be have to spend a minimum amount within the first 3 months (usually anywhere from $500 to $4000, depending on the card you sign up for) in order to qualify for the big initial points/mileage bonuses. You’re not required to spend this much, but if you do (and you really should), you’ll get a fantastic head start on amassing quite a few points/miles that’ll save you money on your next trip or future purchase.
For example, the Chase Sapphire Preferred card offers 50,000 bonus points when you sign up and spend $4000 within the first 3 months. Personally, I was able to redeem these points for 2 free round trip tickets to Hawaii for my honeymoon with my wife! This saved us over $2000 and as a result, allowed us to splurge more freely on other activities while we were there. Convertible car rental, parasailing, jet skis, exotic foods—whatever we desired, we happily enjoyed. We were able to experience a lot more and and with a more worry-free attitude with our expenses. Certainly a priceless feeling that’s beneficial for a honeymoon or any other trip!
Spend on What You Need
Ideally, you should be using your credit card on purchases that you would normally pay cash for. If a particular credit card has a higher minimum for its bonus rewards, then consider signing up for the card right before larger, planned purchases, such as holiday gifts or household furniture/appliances. That way, you’re not stuck with a credit card that has a spending minimum with nothing to buy.
Credit Cards are NOT for Shopaholics
So despite all the benefits of credit cards, it’s simply not for everyone. If you’re crawling out of debt, can’t control your spending, or can’t pay off your credit card bill at end of the month, then credit cards can end up hurting you with their high interest rates on unpaid balances. So similarly to cash, never spend more than what you can afford!
However, if you earn a comfortable salary and are responsible enough to pay off your statement balance every month, then go ahead and enjoy the benefits of credit cards!