Much has been made about the dangers of credit cards: The temptation to overspend, the “interest rate trap,” and the fear of drowning in debt across credit cards. However, there are several situations where it can make sense to reach for a credit card instead of your debit card – especially if you’re smart about your spending and stick to your budget.
From better consumer protections to earning valuable points towards your next vacation, there are a lot of great benefits that come with using a credit card. Here are three situations where you should absolutely choose to use a credit card at checkout.
Use Credit Cards When Shopping Online
Online shopping can be hazardous beyond the temptation to spend beyond your budget. Buying from suspicious social media ads and websites, or a data leak from one of your favorite brands can lead to unauthorized charges from stolen card numbers.
If you are a fraud victim, credit cards provide more consumer protection than debit cards. Many card providers offer zero-liability protection if you report fraud within 30 days of discovering it, while federal law limits your liability to only $50 if you report it within 60 days of discovery.
Being a smart shopper online involves identifying potential scams and limiting your risk. Using a credit card at the digital checkout is the smart choice towards preventing theft when you least expect it.
Use Credit Cards When You Have a Plan to Pay Off a Major Purchase
One of the touted advantages of credit cards is the ability to break a major purchase into several smaller payments. While this can be true, it also requires a lot of planning and discipline — otherwise, you might end up in a debt trap.
Anytime you carry a credit card balance, you are charged an interest fee on what you owe. Interest is charged monthly, and compounds for as long as you hold a balance. While that might not sound like much, it can add up quickly. For example: If you hold a $5,000 balance on a credit card with an 18.9% interest rate and 4% minimum monthly payment, it would take you more than 11 years to pay it off at a total cost of over $8,000.
If you do make a big purchase on a credit card, make sure you have a plan to pay it off quickly. More importantly, don’t add any more debt to that card until the balance is paid off. This gives you the flexibility to take full advantage of a credit card without paying excessive interest.
Use Credit Cards When You Can Earn Rewards Points
Have you ever heard the term: “Your money should work for you?” The same idea applies to your credit card spending. There’s no shortage of credit cards that offer valuable rewards points every time you use them, including the SESLOC Visa Signature® Rewards credit card. In turn, those rewards points can be used for air travel and hotel rooms, cash back rewards, gift cards, and much more. Be sure to check with your rewards card issuer to find out what rewards you could receive.
While rewards points are a great perk of using your credit card, it’s important to be sure you can pay the balance off each month. If you don’t, the cost of compounding interest can quickly negate the value of those points. Make sure you get the benefit of your points by responsibly spending within your budget.
If you need help managing your credit card discipline, SESLOC is on your side. Through our partnership with GreenPath Financial Wellness, members always have access to educational tools to improve their relationship with credit or get financial counseling to help create a debt reduction plan. Dedication to financial well-being is just another way we make sure members save more.
