10 Benefits of Using a Credit Card

There are many advantages of credit cards if you are disciplined with your spending, pay your card balance off in full every month and understand how credit cards work.

We’ve managed to find 12 ways credit cards can make your life easier.

If you are not disciplined and find your credit card too tempting, then you might be better off cutting it up.

Credit cards can get you into financial trouble, particularly if you are an impulse buyer. And of course, if you already owe money on your credit card, then paying it off should be your top priority.

According to MoneySmart’s debt clock, Australians have currently racked up nearly $32 billion in debt, with an average of $4,200 per cardholder and interest payments of more than $700 per year. That’s a lot of debt!

But it’s not all doom and gloom – credit cards are not the source of all financial evil.

If you do have the self-discipline to manage your spending, there can be some great advantages to using a credit card. Here are 12 ways credit cards can make your life easier.

1. Rewards programs

There are many credit cards that have great reward programs, but they need to work for you. There is no point overspending or buying things you don’t need just to get points.

So, think about how you use your credit card and then choose which program would benefit you most. You can spend credit card rewards points on all sorts of things, from flights and car hires to petrol and grocery shopping.

Also, check if there is an annual fee for the card. Sometimes these can be paid for with points but you need to make sure you would earn enough points in the year to pay off the fee and get something with the leftover points.

You can compare Rewards credit cards on the Canstar website:

2.Pay Your Bill

You can check your next minimum payment amount and due date and make your credit card payment directly on your credit card issuer’s website.

All you need is your checking account and routing number (unfortunately, you can't pay one credit card with another).

Depending on your bank and card issuer, you may be able to make the same day payment, allowing you to avoid expensive late fees.

3. Signup bonuses

Many credit cards offer attractive bonuses that reward you for signing up with them, such as large amounts of bonus points, complimentary flights, low or nonexistent fees and other long-term perks, such as promotional and reduced interest rates.

However, not all cards with a signup bonus are good value, so you need to have a close look at the terms and conditions before applying.

Chances are, there will be certain requirements that need to be met, such a minimum expenditure in the first few months. If these requirements are in line with your spending habits, then a credit card with a signup bonus can be excellent value.

You can read the article below to see what high-rated credit cards are currently offering signup deals, or you can look directly in the table below.

4. Cashback

As opposed to Rewards cards, which earn you points for spending money on certain things, cashback cards pay the money back into your account. These cards will save you money based on your monthly expenses, and the amount you’ll get back will depend on the credit card’s cashback rate.

The right card will earn anywhere from 1% to 5% back on your purchases. Depending on where you shop, certain places will even give higher rates of up to 10% for certain purchases during bonus periods.

5. Fraud protection

With the wealth of scams and phishing attacks that are occurring today, it is reassuring to know that the vast majority of credit cards on the market cover security and fraud protection, keeping your money safe from fraudulent purchases.

For example, Visa credit cards have the ‘Verified by Visa’ technology in them, which instantly monitors your account for suspicious purchases.

If your card is used fraudulently, you can simply notify your credit card company. Doing so means you won’t have to pay for that transaction while they sort out a new card for you.

The next two points make this feature even more important.

6. Complimentary travel insurance

Most credit cards come with a number of consumer protections, including rental car insurance, purchase protection insurance, extended warranty insurance and even travel insurance.

According to Canstar data, more than one in five visitors to our site look for cards with travel insurance attached, making it one of the most in-demand features around.

These complementary extras can save you a great deal of time and money as well as peace of mind, so it might be worth looking for credit cards that offer travel insurance.

7. Interest-free days

The final benefit you can get from using a credit card is the number of interest-free days on offer. The majority of credit cards offer 55 days interest-free, with some as high as 62. This means that you can have up to 62 days where you are not charged interest on any purchases.

To obtain the full amount of interest-free days, you need to pay off your balance for the current and previous month’s statement. You can learn more about how interest-free days work by reading the article below.

8. Build your credit score

Having a credit card can help you to build up your credit history and a credit rating – if you make sure you pay off the balance in full every month and keep your spending at a low level.

A good credit score will make it much easier and less stressful to apply for various types of loans in the future, such as car loans and home loans, so practising good repayment habits with a credit card can be a good way to build a positive credit score.

9. Works in any currency

You can take your credit card with you overseas in order to make purchases in a foreign country; you will be charged a relatively minor currency conversion fee in the meantime.

There are even some cards that don’t charge a currency conversion fee in certain stores and countries.

Travel credit cards are a popular way to spend money overseas, and good ones offer strong exchange rates, concierge services and pre-authorisations for hotel bookings, among other benefits.

You can learn more about travel credit cards by reading our 2016 research below, and by following the links in the table.

10. Less cash on hand

Last month, Canstar revealed that 60% of Gen Y claim that only use cash when absolutely necessary.

We are fast becoming a cashless society, and credit cards – with the help of digital wallet technology in smartphones – are more popular than ever.

Credit cards are not only a more convenient payment option for a lot of people, but they are also safer; a credit card can be quickly cancelled if it is stolen.

Cash can never be retrieved if you lose it, unless you’re lucky enough to find it again.

Safety Tips

To avoid scams and prevent your login information getting into the wrong hands, always make sure you’re at the correct website and never enter your information into a webpage you arrived at by clicking on a link.