Why I use a credit card

This is an article that should help to explain to it's reader the benefits of using a credit card over a debit card or just using ordinary cash:

Benefits of a credit card



Just some of the benefits of Credit cards
Assuming you are good with debt and can control your spending habits, the following are six reasons why you should use a credit card (paying it off in full each month):


  1. Cashback - Many credit cards offer cashback. This is free money!!! Why would you not want this? For example you use a credit card that offers 1% cashback on all expenditures. You use this card for one years purchases and end up spending £10,000 on the card. This entitles you to £100 cashback from the bank, for free.  Sometimes you will be asked to pay for a cashback credit card. Read this article to see if it's worth it.
  2. Rewards -  In addition to or instead of cashback a credit card can generate points that can be exchanged for airmiles, vouchers or other gifts. Free things!!!!! Sounds great!
  3. Section 75 Cover - Essentially this means that the credit card is equally liable for breaches of the contract between buyer and seller. This means you have free cover for undelivered goods, faulty or damaged items. You have the right to refunded if you claim within 6 years. Even if you only pay for the goods in part with credit card, you are covered for the full cost of the item. There will be an equivalent in the USA.
  4. Travel Insurance - Free travel insurance is available with some cards.
  5. Emergency credit cards or cash - If your card is lost, stolen or damaged then the credit card company replaces your cards or could potentially provide up to £1000 in cash within the hour.
  6. Quick loan - At one point in the early stages of his entrepreneurial career, the successful businessman Duncan Bannatyne had £30,000 worth of credit card debt. He needed this to help start one of his businesses and it was a quick way to gain access to a large amount of credit. The key is to pay it off in full each month. Furthermore, using credit rather than the money in your current account delays money coming out of your account allowing your savings to accrue an extra months worth of interest.
What are the reasons not to use a credit card? Throw them out and I'll try to convince you otherwise.

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10 comments

Isabelle Chan said...

Hi, I'm a student in Singapore American School and I'm taking a personal finance class. I found this article so interesting as technologies continue to advance, it seems like using credit cards would be easier to use and keep track of compared to cash.

Austin said...

Hey, just like the commenter above, I'm a high school student from Singapore American School taking a personal finance course.

I always thought credit cards might have been a bad thing to have, but after reading your post, it seems that as long as the debt is paid fully at the end of the month, credit cards not only make it convenient to buy things, but offer rewards and free cash!

However I do have a question - after a couple years receiving free cash and rewards at no cost, would the credit card company possibly reduce the potential rewards?

Taline said...

I use my AMEX rewards and get about $1000 cash back per year :)

Mr. Moneybanks said...

Isabelle - I am actually of the opinion that cash will eventually become obsolete. Thanks for commenting.

Austin - A few (but not all) cards do come with clauses whereby the benefits are reduced after a period of time (12 months usually). However, you can always shop around for the next best card. There's nothing wrong with moving card every time the good deals run out. But I will reiterate that you will never owe the credit card company a penny as long as you pay off the debt in full each month so any perks of the card are totally a bonus.

Taline - Wow! That's impressive! Which card are you using?

Anthony Thompson said...

Beautiful post! Credit cards are great provided that you use them responsibly. You explained the benefits perfectly. Nice job!

Mr. Moneybanks said...

Thanks Anthony. Appreciate the comments

Shilpan said...

I use Amex Delta skymiles card. And, I get free first class international ticket every few years. Not bad, as long as I pay in full every month.

Mr. Moneybanks said...

Nice one Shilpan. It's so simple. Just as you said "pay in full every month"

Isabelle Chan said...

Yes, cash may one day become obsolete, but aren't you worried that you may overspend and go into debt?

Mr. Moneybanks said...

Three things prevent me from overspending: careful budgeting, paying off in full each week by direct debit from my current account, and making sure that my monthly credit limit is less than my monthly income coming into my current account.