Credit card debt might be the first thing that comes to your mind when you think about the idea of using it for your everyday transactions. However, there are several benefits to using them, especially if you have just graduated, such as building your credit profile and the chance to earn valuable rewards.
Credit cards give you access to money you do not have, and the best way to stay out of debt is to pay the balance off in full each month, helping you avoid interest and refraining you from overspending.
Reasons Why Fresh Graduates Should Use Credit Cards
Check out the reasons below which explains why fresh graduates from college must consider using credit cards for transactions if they possess minimum to no financial expertise:
Safeguard your Bank Account
Credit cards render reinforced fraud protection and offer a degree of segregation from your checking account, serving as an additional safety measure.
Debit cards are linked to your checking account, which means every time you carry out a purchase, funds get withdrawn immediately from your account and get transferred to the merchant.
Therefore, if an unauthorized individual gets access to your debit card, be it the physical card, or just your personal information from it and starts withdrawing cash, you lose your wealth as the individual spends.
While most banks and debit card processors provide a level of primitive fraud protection or more, you might not get your wealth back right away, specifically, if your case requires a long investigation.
While using a credit card, money in your bank account stays untouched until you pay your statement. If an individual steals your card and makes fraudulent transactions, you can flag them for the card issuer, and you do not have to pay them.
Your card will get frozen, and an investigation will be pending into the fraud. This step removes the need to worry about losing cash as-well-as the inconveniences associated with that.
To Earn Incentives and Reward Points
In the modern world, the cashback credit card concept has blossomed, with some cards now offering 2%, 3% or even as high as 6% cashback on specific purchases, though such lucrative offers that include either quarterly or annual spending caps.
Credit cards help enable cardholders to push them towards acquiring one or more points per dollar in spending. Several reward credit cards offer bonus points for specified categories of spending, including restaurants, groceries or gasoline.
When the earnings on certain thresholds are met, you can redeem points for travel, gift cards from retailers and restaurants, or get merchandise items via the credit card provider’s online rewards portal.
To Strengthen your Credit History
Every adult today has a credit profile, which is stored safely by credit reporting bureaus. This profile comprises knowledge about every loan applied by you and how long it took to pay it back. This information is your credit score, which is a numerical depiction of your credit profile.
Your credit score gets affected positively by things that corroborate a history of using credit responsibly, including a history of on-time payments, holding multiple accounts, being rid of debt, and having held access to credit for a prolonged period.
However, it gets affected negatively by actions such as missing a payment or being late or having a little history of acquiring credit.
When you pay with your credit card each month, that includes another positive data point to your credit profile, helping you build and raise your credit score.
When applying for a major loan such as for a car or a mortgage, you are more likely to receive approval at a low-interest rate if you present forth a positive credit history. Swiping a debit card, on the contrary, does not impact your credit history at all.
If you wish to get a loan to finance yourself for an upcoming project, home renovations, or other reasons but have a poor credit history, this guide to getting a loan with bad credit will surely be of help to you in the upcoming future.
For Better Purchase and Travel Protections
Several credit cards offer specific purchase and travel protections. Some cards offer robust coverage, including trip delay insurance, which covers your expenses for stuff like hotels, clothing, food, as-well-as toiletries for up to a certain sum per person if your mode of travel gets delayed overnight, or over 12 hours during the day.
When locked in a disagreement with a merchant, a credit card empowers you with the ability to request a charge-back. Therefore, when you oppose a charge, the credit card company investigates, and there is no need to pay for it until the end of the investigation.
Debit cards typically do not offer similar protections, implying that you are better off using a credit card when conducting your necessary purchases and travel.
After making a debit card purchase, your money leaves your account immediately. When you carry out a credit card purchase, your money stays in your checking account until the day you pay your credit card bill.
Holding on to your funds for this extra time can be fruitful in these aspects:
The time value of money will save your wealth in the long run. Delaying eventual payment makes your purchase feel relatively cheaper than it would be otherwise. Besides, by paying via a credit card instead of your debit card, your cash will remain for more time in your bank account.
Moreover, if you pay your credit card from an interest-bearing checking account, you will acquire wealth during the grace period. The extra capital will eventually pile up to a significant amount.
When you consistently pay with a credit card, there is no reason to watch your bank account balance as closely and wonder if you can get through the month.
Credit cards are enjoyed by the disciplined, who remain apprehensive of their ability to pay off the monthly bill in full by the due date. Shift most of your purchases to your credit card, and do not use your debit card for anything but accessing the ATM.
If you follow the guide mentioned above, the combination of rewards, buyer protection, as-well-as the value of cash-in-hand will make you stand apart from those who pay with a debit card, check, or cash. Check out this article by creditspring for more clarity on concepts like APR.