Credit cards are usually perceived as overpriced loans which usually make a lot of people who aren’t disciplined enough to make payments on it end up in debt as the cards can cost you a great deal in transaction costs, annual fees and interest charges.
It’s a way of borrowing money, which you still have to pay and people still purchase them, because there are many cases where a credit card comes in handy. If you use it correctly by paying the balance off in full each month and only charging what you can afford to pay off each month.
And even though people say credit cards are good because you can use them to pay for phone or online purchases the same can be said for a debit card, which accesses your own funds and you don’t accrue a balance on which you need to pay interest.
Therefore why are you better off paying with a credit card than a debit? Here are 5 reasons.
- To build your credit history and credit cards when used responsibly improve your credit score. As credit card companies report your payment activity to the credit bureaus, whereas debit card use doesn’t appear anywhere on your credit report. And a high credit score can also mean you pay an interest rate several points lower on insurance or loans of home or car than the rate someone with a poor credit history would pay; saving you money over the life of the loan.
- Most credit cards are accepted around the world whereas certain purchases are difficult to make with a debit card. Rental car companies and hotels want customers to pay with credit cards because it can be easier to charge customers for any damage they cause to a room or a car this way.
- Most credit cards automatically come with insurance of rental car or travel insurance or product warranties. And if you sign up for the right credit card, you can earn back on your purchases price of an item if it’s damaged, lost or stolen. These offers also allow you to benefit from purchase insurance when buying online or from a remote destination.
- Many credit cards offer significant rewards when used responsibly of a reward point system offering up a large number of points that can be redeemed for rewards like gift cards or air travel. Whereas the standard debit card offers very small or zero rewards.