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The Top 5 Advantages of Credit Cards

Posted on 04. Jun, 2009 in Saving money

Do you think credit cards can have a positive or negative effect within an individual’s or business’s life? While credit cards can earn negative press, they actually offer a variety of advantages for both businesses and individuals. Credit cards can offer convenience, can improve credit scores, can help to manage a monthly or annual budget, can provide short term leverage and can provide rewards benefits.

Here are the top 5 advantages of credit cards:

• Convenience- In today’s consumer marketplace, it is actually inconvenient in many cases to pay for purchases with a check or with cash. When shopping online, you may not have an option other than credit cards to complete purchases. Therefore, credit cards offer a simple and easy solution for paying for both individual and business purchases, whether they are completed in person or online.

• Credit Score- A person’s credit score is a reflection of their overall credit risk in the eyes of creditors. Credit cards when the minimum balance is paid, when the total available credit line is not exceeded and when the overall credit line is utilized responsibly, they can improve a person’s credit score over time. Credit scores are not only important for obtaining additional credit, but they can impact deposits required by utility companies and even the amount of your annual auto insurance premiums. It is advised to keep one major credit card rather than several smaller credit cards to aid your personal credit score’s value.

• Personal Budget Management- When you use cash to pay for household expenses, many people find it challenging to manage what they are actually spending their money on. Using a credit card instead can allow you to review not only your charges monthly, but which budget categories your charges fit into. If you have the self discipline to manage how much your charge on your credit card each month, you can actually gather valuable information about your personal spending habits which can benefit your household in the long run.

• Short Term Leverage- Because you often have 30 days between when you make your credit card charges and when you have to pay for them, credit cards can offer a short term leverage option. While this option can benefit individuals in a pinch, it is extremely beneficial for businesses which may have a delay in the payment of their accounts payable.

• Rewards Points- Many credit cards today offer the cardholder a variety of rewards options. Credit card companies will offer rewards points to the cardholder, generally offering 1 point per every dollar spent on the credit card. And, in many cases, credit card companies rewards will offer a list for the consumer to select from based upon their individual needs. Rewards can be used for hotel and airfare purchases, for product purchases or even for cash rebates.

So, despite some common beliefs, there are a variety of advantages to credit cards.

Tags: Credit Card, Credit cards