Credit cards will create a lot of problems in the wrong hands, and when consumer debt gets out of hand, things can get ugly in a hurry. Unfortunately, credit cards do not come with instructions for optimal use. Instead, lenders offer you terms and conditions infused with language guaranteed to confound and confuse, and written in print so small that even a magnifying glass is not much help. Still, as our world leans away from the use of checks and currency, credit cards play an increasingly significant role in day-to-day life.
Credit History
Perhaps the most compelling reason that you need a credit card is so that you can establish and improve your credit. It sounds like some kind of Orwellian double-speak, but good credit improves your life by making things more affordable. Credit card accounts represent a class of credit, just as a home mortgage and an auto loan represent other classes of credit, and managing these various types of accounts well demonstrates that you are a responsible borrower. If the logic escapes you, it is all part of the complex formula credit bureaus use to derive a credit score, a necessary item required when you want to make a large purchase such as a home.
Convenience
Most people use credit cards for the wrong reason. Rather than thinking of your line of credit as found money, you should consider your credit card as an extension of your bank account; a way of buying time for a purchase you can pay in full when your next bill comes. It is much easier to carry one card than a wallet full of cash, and when you use your credit card for common purchases, at the end of the month, you will have a comprehensive record of where the money went. Use the information on your credit card statement with money management software to track your spending habits and better manage your money.
Theft Protection
Consider the ways that you can pay for purchases: cash, check, money order, debit card or credit card. When someone taps into your checking account, your money is gone and the burden is on you to convince the bank to pay you back. If you lose cash, or someone steals it from you, you are just out of luck. Credit card companies want your business because it is a competitive market, and one of their services involves protecting you from fraudulent charges on your account. They have established procedures for working out disputes that go beyond the coverage offered with your basic checking account services.
Rewards and Benefits
Not every credit card offers a rewards program, and for those who are struggling to rebuild their credit, just having a card and the opportunity to rebuild their credit is a reward in itself. Still, if you are in a position to shop around for the best credit card account, consider perks such as cash back, airline mileage points, gift certificates or points for merchandise. Such things as extended warranty plans, warranty tracking on appliances and electronics, theft protection on items purchased with the card, are just a few of the perks that may be offered with certain accounts.
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