Benefits of Credit Cards:
A Biblical Christian View
If–and only if–you avoid the dangers of using credit cards by totally avoiding high-interest debt and by avoiding the danger of overspending, then credit cards can have valuable benefits. First, many credit cards offer reward programs that give you cash back or other benefits. By returning to you a portion of every dollar you spend, they enable you to reduce your net expenses. Credit card reward programs will be discussed underneath “III. Best Deals on Credit Cards” below.
Responsible credit card use also helps you to build a solid credit history and have a high FICO score. Having a good credit history and a high credit score will help you if you get approved and have a lower interest rate on a home mortgage, lower your rate on car and home insurance, keep you from having to pay a significant amount in advance if you have to rent an apartment or buy a cell phone, and give you a lower interest rate on a car loan (although you are almost always better off buying a cheaper used car than a new car and taking out a car loan.) A good credit history can even help you get a job–the majority of employers check the credit history of at least some of the employees they hire. (If you were a business owner, and you had two applicants apply for a cashier position, would you rather hire the one with a stellar credit history that indicated personal and financial responsibility, or the one whose credit history indicates that he is irresponsible, is in desperate financial straits, and would find stealing company cash highly tempting?) If you are looking for a home loan and you have a twenty-year credit history in which you always paid your bills on time every month, you are a much more attractive customer than if you have no credit history at all, all other factors being equal. Of course, if you overspend and are carrying high debt on credit cards, then all other factors are NOT equal. It is a very good idea to obtain a free copy of your credit score and credit report by clicking here.
Credit cards offer valuable fraud protection. Maximum liability for unauthorized purchases is $50, and with many major card companies, you have zero liability. Furthermore, the money has not come out of your own bank account but has been improperly added to your credit card balance, so the criminal has stolen the credit card company’s money, not your own. If your wallet disappears and suddenly you find out that you have somehow spent thousands of dollars in another part of the United States or in a foreign nation that you did not even know existed, you can just call your credit card, explain that the transactions were fraudulent, receive a different credit card number, and go on with life without being responsible for the fraud. On a debit card, when your own dollars are no longer present in your bank account, the situation is more serious. Even if you get money stolen from a debit card back from eventually, while you are working on the entire process you might be out of needed funds. If thousands of dollars in cash are gone, then you are probably never getting them back.
A good credit card also offers you the ability to dispute problematic purchases far more easily. If a merchant rips you off, you can call your credit card company and dispute the purchase with the credit card. You will have the amount of the purchase credited back to you immediately, and, if your case is reasonable, you probably will never have to pay for the item. If your credit card has good customer service, you may even just receive a credit for the item even if the card company does not seek to recover the money from the merchant. On the other hand, if you purchased an item with cash, and the merchant has swindled you, you may be left with only the options of suing the merchant, an expensive and extremely time-consuming hassle, or just losing your money. The credit card company can fight a swindling merchant in ways that you cannot. For example, it can directly take the money out of the merchant’s bank account by reversing the transaction that deposited the funds–you cannot do that when you put cash into a merchant’s hands. The “cushion” between your own funds and the merchant, as well as the delay between the time you make the purchase and the time your automatic payment in full comes through a month or two later, can be very valuable.
Many credit cards offer extended warranties on purchases made. They also frequently offer replacement, repair, or reimbursement for several months after a purchase if the item is stolen, vandalized, or damaged in a fire. Many will reimburse the cost of luggage lost or misdirected if one purchases airfare on the card. Many also cover damage for auto rentals, making the purchase of insurance for the rental unnecessary. They often offer discounted roadside assistance services.
In summary, a good credit card offers consumer protections that are superior to what one can obtain with the use of cash or a debit card.