Benefits of using Credit Cards

Credit cards can get a lot of people in trouble. The interest rates are high and undisciplined shoppers can acquire a huge amount of debt very quickly. However there are many benefits in using a credit card for your purchases. For example: credit cards can be one of the most useful tools in tracking your expenses. They way they work is beautiful and simple. You make a purchase on your credit card, the charge is sent to the bank, the bank approves the transaction, and the bank posts it on a website or makes it available for you to download into your personal financial software.

You can’t beat the ease of use for record keeping. It almost happens automatically. For people who pay the balance at the end of each month there is no expense for this service. In fact with the reward programs available on most cards, banks basically pay you to use the card.

Of course this only works because many people do not pay their balance at the end of the month. If no one carried a balance, the banks would start losing money and they definitely would not have any of those programs that give you free sky miles or points toward buying books and electronics.

The average amount owed by an American with a credit card is over $8,000. For the banks this is a windfall. The interest rate on credit cards is very high–much higher than other types of loans. Banks make a tremendous amount of money of people carrying balances.

If you have the financial discipline to pay off your balance at the end of each month and track your credit card expenses just like a checking account, you will basically get the credit card services for free–paid for by people who do not pay off their balance each month.

You get free record keeping, free reward points, and many other features. Many credit cards offer some type of insurance if your purchase is stolen. Others offer extra life insurance policies for air travel booked on their cards or free rental car insurance. Some credit card companies offer extended warrantees on certain types of items purchased with their credit card.

One of the most important benefits of a credit card company is the fact that they will usually stand up for a good customer that is being charged incorrectly. For example, assume you cancel an order with a merchant and they ship you the goods anyway. When you try to return the items, the merchant says that you can’t. A quick call to your credit card company will probably be all that is necessary to resolve the situation. Credit card companies can revoke money from merchants and this is exactly what they will do if you complain that you were shipped an item that was canceled. That means instead of you spending hours on the phone trying to resolve the situation, your credit card company will call the merchant and tell them that you didn’t want the item and that they are revoking payment. Naturally the company is going to let you return the item so they don’t lose the item and the payment.

There are many benefits you can obtain by using a credit card–all for free as long as you pay off your balance at the end of each month. Other people aren’t going to pay off the balance and they are paying for you to get free service. Many of these benefits are found in the fine print of your statement or in the paperwork that came with the card in the first place. Make sure you understand how everything works because the benefits differ from card to card.