Imagine using someone else’s money for buying most of the things in life and paying back several weeks later (free loan); considering time value of the money, that’s a great deal!
It’s not as uncommon as you may think thanks to the invention of Credit Card. I’ve been using credit cards for over a decade now and I literally use it everywhere it’s accepted. I’ve had transactions as small as 58 cents and as large as several thousand dollars on my credit card. Following are the advantages I’ve discovered over the years:
- Free loan for upto 50 days: this is my favorite advantage. You don’t need to touch your money for buying things; just use bank’s money and pay them later! This means that if something is on sale on Thursday and you don’t get paid till Friday, you can still buy it. Also if you’re getting reimbursed for purchases, you don’t have to pay out of pocket – you’ll have money before the due date. (I always do this for work travel)
- Several protections that come with the card: Purchase protection, price protection, fraud protection, extended warranty protection, and return protection to name a few. I’ve used fraud protection, price protection (if a card purchase is advertised for less in print or online within 90 days, the difference can be reimbursed) few times
- Convenience: can’t beat the convenience of not having to worry whether you have enough cash or a check book. [I still carry $20, just for emergencies – my longest time without using the emergency cash is around a year]
- Merchants putting hold on card: Some merchants like to put hold on cards for amount greater than you’re supposed to pay, for example: hotels, gas station, rental cars. With credit card, the hold amount is not going out of your pocket and when the final amount is charged, you only have to pay that much. I’ve had hotels put as much as $50 – $300 extra on hold depending on the location
- Items easier to dispute: if there are wrong charges with a merchant, it’s easier to dispute and you haven’t paid money from your pocket yet, so money that can be spent elsewhere is not stuck. For some of my credit cards, charges of 5 – 10 dollars don’t even go to official dispute, I’ve had it reimbursed immediately by the bank
- No Foreign Transaction Fees: lot of cards these days offer this benefit, so you can enjoy more time exploring and less time worrying about the fees and waiting in line to get local currency
- Build Credit: Credit card helps build credit, which is very useful for a buying a lot of things on credit in future – house mortgage is a prime example
- Rewards/Cashback and several other benefits that come with the card: There are several signup bonus cards, cashback and travel reward cards. Several websites have dedicated sections to help find the best reward card suited for every lifestyle. We make few hundred dollars in cashback and few more in travel reward each year just by making regular purchases on credit cards. Reward card annual fee may vary depending on what they offer; it’s $550 for Amex Platinum and $450 for Chase Sapphire Reserve at the time of writing this post. Paying several hundred dollars are well worth if you are able to use most the rewards the card has to offer. I personally have Sapphire Reserve and I think it’s worth having even without the signup bonus for folks who like to travel
So next time you are paying for anything, think about the benefits of using credit card vs the other mode of payment. (I use cash or check for transactions that do not accept credit card, or it’s more expensive to use. For example: if a merchant is trying to charge me 3% extra for using credit card, sometimes it’s not worth the extra charge)
P.S.: I always pay the monthly bill in full [treat credit card as a charge card], a lot of these benefits are not worth it if you carry a balance.