Don't Carry a Balance? Here's Why You Still Need a Credit Card

By Mikey Rox. Last updated 4 September 2017. 0 comments

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Anybody can go into debt, quickly. Giving into impulse buys is only a swipe away with plastic in your pocket. It's easy to lose track of how much you're spending, which can spiral out of control before you know it.

For these reasons, maybe you avoid credit cards or feel they aren't worth the hassle. That's one way to stay out of trouble, of course, but even if you're committed to limiting your amount of personal debt and you refuse to carry a balance, there's a case to be made for using credit cards. Take a look.

1. You'll build or maintain a good credit score

If you're interested in building a credit history, owning and using a credit card is often necessary. The trick, of course, is managing the account responsibly.

The way a credit card impacts your credit score and personal finances has everything to do with the way you handle the account. Just because one person you know had a bad experience with credit doesn't mean you'll have the same experience, especially if you stay on top of things.

Paying off your balance every month or making timely minimum payments adds positive activity to your credit report. This is essential to establishing credit. And if you already have a credit history, periodically using a credit card keeps your account active and helps build an even stronger credit score. (See also: How to Use Credit Cards to Improve Your Credit Score)

2. You can receive rewards based on usage

Another reason to use a credit card is the opportunity to earn rewards for every purchase — because who doesn't love a good freebie? Your rewards can come in the form of points, miles, or cash back redeemable for a check, statement credit, airline tickets, hotel stays, gift cards, or merchandise. The more you use the card, the more free or discounted stuff you can score.

The downside is that reward credit cards tend to have slightly higher interest rates than non-reward cards. But if you're disciplined enough to pay off your balance in full every month, you don't have to feel guilty because there won't be any interest to worry about. (See also: Best Cash Back Credit Cards)

3. It'll help you survive an emergency

It doesn't matter how responsible you are with money: Most people go through a rough patch at some point in life. If you hit a financial low or deal with a string of unexpected expenses, a credit card can function as a short-term loan providing cash for urgent situations. You'll pay interest on these charges if you carry a balance, but this option is cheaper than a short-term cash advance loan, and you'll maintain your privacy since you won't have to borrow from friends or family. Just make sure to prioritize paying off this balance when your emergency is handled.

4. It's safer than cash

Using a credit card is also safer than cash, especially when traveling. If you lose or have your wallet stolen, you can't replace the cash inside. But if your credit cards are lost or stolen, your bank can issue a replacement card and remove fraudulent charges from your account.

Since bank debit cards are linked to your bank account, credit cards are sometimes safer than these cards. If someone uses your debit card fraudulently, this person can drain your bank account, resulting in overdraft fees. Your bank will reimburse your money — not all is lost — but it can take up to 10 days to sort through the mess and get your money back. (See also: 4 Reasons Credit Is Safer Than Debit)

5. It'll help you keep accurate expense records

Credit cards also are useful for keeping track of spending for business and tax purposes, especially if you're not the best at saving receipts. Since credit card statements include a record of your purchases, use your credit card for business-related purchases, and then refer to your statement when recording business expenses. For this to work, keep a close eye on how much you're spending throughout the month to avoid going overboard and getting into long-term debt.

6. It buys extra protection

A credit card isn't only practical during an emergency or when you're looking to earn reward points, it also buys extra protection when used for certain purchases. For example, some credit cards offer rental car coverage at no additional cost, which means you can decline a car rental company's optional coverage when booking your reservation.

Some credit cards have an extended warranty policy on select purchases too, giving you an extra year of protection after a manufacturer's warranty expires. Other credit cards may include travel insurance protection which compensates card members for costs incurred due to trip cancellation, lost luggage, travel accidents, etc. (See also: 14 Awesome Credit Card Perks You Didn't Know About)

Benefits vary by card, so contact your credit card company for information on member perks.

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