The Benefits to Having a Credit Card
If you want to save money, you need to know how credit cards work. Luckily, it's a lot simpler than most people make it sound. With a little knowledge on how credit cards work, you’ll know how to work the system, so you reap the benefits these programs offer.
Credit Card vs. Debit Cards - What Is the Difference?
Both types of cards are convenient, look similar, are often issued at the same bank, and are typically accepted at the same places. The main distinction between credit and debit cards is where the money comes from. When you pay with a debit card, you are pulling cash from your checking account. When you use a credit card, you are charging your purchase to a line of credit.
This difference brings with it a few implications. The most important thing to keep in mind is that when you charge to a line of credit, there are interest rates to take into consideration. If you pay your bill at the end of the month, you won’t have to pay interest. But any unpaid balance you bring into a new month will accrue interest.
What Credit Card Benefits Should I Look For?
Before applying for an account, you need to review your needs. The best credit card offers will have a mix of the benefits listed below.
Building Credit. You want to look for a reputable card that reports to the major credit reporting agencies when you make your payments on time. Cards offered through stores rarely have this benefit.
Approval time. If you are looking to have things start right away, look for instant approval credit cards. There are many programs that can tell you right away.
International travel. If you plan to travel out of the country, you’ll want to look for a plan that offers a zero percent foreign exchange rate.
Protections. Most major credit cards will offer you more protection against fraud than a regular debit card will.
Top Reward Credit Cards. A great rewards program can offer you bonuses at certain stores, cash back on regular purchases, or cover travel expenses. Consider what you would like in a rewards program and weigh those bonuses when deciding which accounts to apply for.
Sign up bonuses. You want to look for 0 APR credit cards, to avoid paying interest, especially for your first year. You also want to look for a waived fee for the first year and sign up points in the rewards program.
What Are the Top Credit Cards to Own?
The Chase Sapphire Preferred® Card is hot right now. If you’re looking for a big sign up bonus, this card offers a lot of value with a bonus of 50,000 points. Note you need to spend $4,000 on the card in the first three months before you’ll receive those points.
The Bank of America® Cash Rewards card is great if you want to see a cash return for your regular purchases. This Mastercard offers three percent cash back in your choice category, two percent at grocery stores, and one percent on all other purchases.
If you have a large balance on another card, consider the Discover it® Balance Transfer. This card offers you a zero percent introductory rate for 18 months.
If you are spending a lot of gas stations, look into the Blue Cash Everyday® Card from American Express. This card offers two percent back at gas stations, among other rewards in the program.
Are Credit Card Benefits Worth It?
A credit card is a financial tool. It’s a way to build up a credit history, protect yourself against identity theft, and take advantage of rewards programs. It will be up to you to figure out how to best use those benefits to your advantage.