Benefits of a Credit Card

The Benefits of Having a Credit Card
July 23, 2024

Some people are wholeheartedly against credit cards and think they are dangerous to ones’ finances.  “Credit cards always lead to trouble,” they say.  Well, sure… almost anything that isn’t used responsibly can be risky.

There are actually several reasons why having a credit card can be a good thing.

Building Credit History

Using a credit card responsibly and making payments on time helps establish a positive credit history, which will be important when applying for a loan for a car or a home.  Your credit history can also be a factor when it comes to getting a job or renting a place to live.

Credit Score Improvement

By not carrying a high balance on, or maxing out, your credit card and making payments on time, you can improve your credit score over time - which can lead to better loan terms and lower interest rates.

For Emergencies

For a long time, I had my mom keep one of my credit cards so I wouldn’t be tempted to use it. It had a limit of $1000 and no balance. It was my ‘in case of emergency’ card. A credit card can cover unexpected expenses that occur when you don’t have funds readily available (which they almost always do, right?). 

You can pay that credit card balance down over a period of time or pay in full by the due date and avoid paying any interest.

Back-up Form of Payment

The terminal at the grocery store decides it doesn’t want to accept your debit card this time – after all your food has been scanned and bagged. Your debit card gets damaged, lost or stolen while you are out of town – or you reach your daily transaction limit when on vacation.  Having a credit card for back-up to pay for purchases, in your wallet or stored in your mobile device, can really get you out of a jam.  

Some hotels and car rental companies do not accept debit cards, so a credit card could be necessary for reservations.

Safe Spending

Like debit cards, credit cards offer protection against fraud and will not hold consumers liable for unauthorized purchases.  I tend to use my credit card when shopping online because if something goes wrong with the transaction, it’s not the hard-earned money in my account that is at risk.

Credit cards added to your digital wallet add another layer of security. You won’t need the actual card with you, just your phone, to pay for in-store and online purchases.

Using a credit card for some purchases can also eliminate holds on the funds in your checking account. I use my credit card at the pump because some gas stations will put a hold on an amount higher than what was spent – for example, I buy $20 worth of gas but there is a hold of $100. This ties up that amount of money in my account until the hold drops off and can easily lead to overdrafts if other purchases are made before it does.  

A colleague recently vacationed in California, and her hotel placed a hold on her card for $100 per each night she stayed.  This could pose a major problem if you have a limited amount of money in your account to spend.

So, credit cards don’t cause financial issues?

Oh, they absolutely can.  Having too many cards can be a slippery slope. Becoming dependent upon them or spending recklessly can lead to unmanageable debt.  It can take many years to pay off a high-interest card that is maxed out when you can only make the minimum payment each month. 

But a credit card with a reasonable limit, a great interest rate (like OFCU’s Visa) that is used responsibly, can be a very beneficial tool in your financial belt.  Learn more about using credit cards with our partner, Banzai.