Credit cards have a bad reputation, and for understandable reasons. Being enabled to spend money you don’t have is risky, and using one effectively requires self control. However, the benefits of taking on a credit card outweigh the risk. Safeguarding oneself against emergency, quick financing for small purchases, and establishing credit to prepare for a larger purchase are the most commonly known uses for a credit card, but here are three lesser known ways to utilize your credit card.
1.Most credit cards are now offering cash back rewards to encourage using them. This means that if you use your credit card instead of a debit card for your usual purchases (groceries, gas, etc.), stay within your usually monthly budget, and pay it off every month, so you don’t owe interest, then you can earn free money! Most of these cards offer only 1% (though I have seen promotional cash back rates as high as 5%), so you won’t earn enough to do anything drastic, but every little bit could make a pretty big difference on meeting your other financial goals!
2. Do you have any kind of expenditures that you need to track separately from your regular spending? This could apply to anything from expenses from a vacation, to entrepreneurial expenses that needs to be kept separate for tax purposes. Opening a second checking account for these purchases could cost you in fees, but utilizing a separate credit card, as long as it is paid off each month, is a much cheaper and convenient way to keep your purchases sorted.
3. Your debit card is generally safe to use, and your financial institution is fighting to keep it that way. However, merchant errors (single purchase posting to your bank account multiple times or a purchase not being reversed etc.) are much more common than you would think and debit card fraud still does happen. Your financial institution has a transaction dispute process in place for when this happens, but your money could still be held up for a few days in the meantime. Credit cards may be just as susceptible, but in the worst case scenario that this happens to you, it’s much less stressful if your checking account is not tied up, especially if you don’t have enough in savings to meet your upcoming obligations in the mean time.
Obviously, you should know yourself well enough to know how you will handle the temptation to overspend and have a plan to minimize your risk before signing up for one, but avoiding the credit card all together, could actually be detrimental to your financial well-being. Have any extra uses for your credit card? I’d love to hear them in the comments below!