There are some real advantages to using the right credit card for ones needs, as well as perceived benefits which only serve to boost the coffers of the credit card provider. An ability to distinguish between the two types of use separates those customers who can reap the real benefits of credit cards and those who become a statistic of credit card debt.
Many people perceive that credit cards are advantageous as they allow one to purchase goods without the necessity of funds. Obtaining goods on credit, with no prospect of repaying the borrowed money in a timely fashion, simply allows people to live beyond their means and then pay the price for it with inflated interest fees. It is only those who can comfortably afford to pay their credit card balance in full each month that actually realise real benefits.
The real benefits of using credit cards come from strategic use of credit. Cards allow consumers to establish a good credit reputation in the easiest way, by simply making monthly purchases without paying interest. A good credit score is vital for receiving preferential interest rates on mortgage loans, the largest single debt most people sign up for.
Comparison shopping for a credit card with additional features beyond purchasing power can save money. Many cards provide insurance against loss or damage of purchases, free travel insurance of some description, and additional extensions on retailer warranties. These benefits can cut the costs of insurance needs and provide additional security for ones purchases. Some card providers offer additional perks such as car hire rental insurance, roadside assistance, and free legal and medical advice when traveling.
Consumers with good credit can take advantage of the extended zero percent interest introductory offers which equate to low interest loans. Unfortunately the perception that such loans are free is negated by the fee levied by the provider, typically 4%. Nevertheless interest free offers can allow consumers to purchase high ticket items for a relatively small cost compared to the rates on personal loans.
Credit cards come with a range of rewards which can be tailored to individual needs by selecting the card which best fits in with ones lifestyle. Cash back, free air travel or hotel accomodation, gas rebates and other offers can represent a good deal, particularly if all monthly spending is placed on the card to ensure the maximum amount of reward points. Cash back cards represent the best actual return in rewards overall. Smart consumers look for cards that offer an initial statement credit in addition to cash backs.
Debit card use is on the rise, but few debit cards offer rewards programs to equal those available on credit cards. Credit cards also have the advantage for internet purchases, as they offer greater consumer protection than debit cards.
There are undoubted benefits to using credit cards if they are used prudently. It is important to remember that almost all the benefits are eliminated if balances are carried or cards are maxed out, and using credit rashly can ruin ones credit reputation.