As long as you manage your credit spending and payments responsibly, there are endless perks to using a credit card. They offer rewards, protection, and convenience.

Why use credit cards? Other payment options, like debit cards and cash, may seem like an easier way to stay within budget. After all, credit cards have a reputation for encouraging you to spend money you don’t have — especially when enticing offers come in the mail.

But here at Money Under 30, we think a good credit card is a must-have. When used responsibly, credit cards can be great for your financial well-being. In fact, smart credit card holders can earn money just by using their card.

So, what are the perks of a credit card over cash, and how can using one help you come out ahead?

Here are 12 ways.

1. They build credit history

Perhaps the most important reason to have a credit card is to build up your credit history.

Credit scores, taken from records of your financial activity, are essential if you plan to borrow money. These scores come partially from your credit card usage.

Unlike debit card use, credit card use is reported to the bureaus that monitor scores. A track record of paying a credit card balance on time helps your score immensely. And the longer you use credit cards, the more you’ll build your credit history, improving your score even more.

Read more: How credit works

2. They offer rewards programs

There are almost as many rewards programs as there are cards. The trick is to find a rewards program that fits with spending habits you already have, or that partners with a retailer you already like.

Rewards programs can include, but aren’t limited to:

  • Points systems cards — You earn points based on how much you spend, and you cash in points for gift cards or other rewards.
  • Frequent flyer cards — You rack up airline miles every time you fly, which you can redeem for discounts on future flights. These cards may offer lucrative sign-up mileage bonuses.
  • Travel rewards cards — These offer “credit card miles” — slightly different from frequent flyer miles, but still giving rewards for travel.
  • Everyday spending rewards cards — These cards earn you rewards in common spending categories like restaurant dining, gas, or groceries. This type of card can be great for users who don’t do much traveling but still want to get the most out of their card.

Read more: Best rewards credit cards

3. They may come with sign-up bonuses

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As a welcome gift, many cards offer bonuses for signing up. These could include perks like bonus miles/points that you can redeem for air travel or hotel stays, or bonus cash back that you can use as a statement credit.

Usually, you have to spend a certain amount on the card (sometimes within a certain time period) to get the bonus, so read the fine print. But it’s still an invaluable perk.

Read more: Best credit card sign-up offers

4. Some give cash back

When you make purchases on cash back credit cards, you earn a small amount of money back, which can then go against your bill, reducing how much you owe.

The value of cash rewards ranges depending on the card and typically can be anywhere from 1% to 6% of your purchase total. That may not sound like much, but over time these rewards can add up to a sizable bonus.

And if you manage to pay your credit card bill in full every month (which you should always aim to do!), then you won’t be losing the cash back earnings to interest — it’s basically free money!

Read more: Best cash back credit cards

5. They track your spending for you

Want to budget better? Credit card statements are a built-in expense tracker. Your purchases get recorded online with all the essential information — where, when, how much, and how often you’re spending. Some card companies keep your spending records around for years.

This benefit becomes especially useful come tax time. With one record of the past year’s spending already compiled, you’ll save time and effort on your taxes. Business expenses, rental property expenses, charity contributions, and more tricky tax return areas all show up on a credit card statement.

Read more: How to budget using credit cards

6. They protect against fraud

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One of credit cards’ biggest advantages over debit cards is the level of fraud protection they offer.

Say your credit card is stolen or someone finds your card information online. Even if the thief starts making purchases on your card right away, you won’t lose much money since charges to credit cards aren’t withdrawn immediately.

Once you notify the card company of the theft, they’ll put a hold on your card and investigate. You aren’t liable for any fraudulent purchases made in the meantime. Federal law protections for credit card holders keep you from losing much cash. The most you’ll potentially be liable for is $50. And if you report before a purchase is made, or if your credit card company has a zero-liability fraud policy, you won’t lose anything.

Now say your debit card is stolen. Since debit card funds are deducted instantly, any money spent on fraudulent purchases will be gone. Automatic payments you’ve scheduled might be canceled as a result. If you report the theft within 60 days, the transactions can be reversed and the money restored. But this takes time and can be much more disruptive than a credit card theft.

Read more: The 5 biggest debit card dangers

7. Some let you transfer your debt to a lower rate

With a balance transfer, you move your debt from one credit card to another. Other debts, like car loans and monthly installment payments, can also be moved to a balance transfer credit card.

Now, this doesn’t mean you wipe out the debt. You’ll still have to pay what you owe, of course. But if you switch the debt to a card with a lower interest rate, you save money over time. Some balance transfer credit cards come with 0% APR for the first year, making it easier to pay off what you owe (since all the money you’re putting towards it goes against the debt, not against interest).

Note that there may be a limit on how much you can transfer over to a balance transfer credit card. And if you keep adding more charges to the card, then you’re going to struggle to pay off the debt, even with 0% interest.

But if you do them responsibly, balance transfers can consolidate your debt and make your life easier.

Read more: Best balance transfer credit cards

8. They may come with purchase protection

Consumer protection is a huge perk of many credit cards. If you buy an item with a credit card and later find out it’s damaged or the quality is poor, you can return the item and get the charge removed.

Credit cards may also offer extended warranties on electronics, furniture, and other items you hope to use for a long time. In many cases the card doubles the time on the manufacturer’s warranty. Make sure to keep your receipts!

Read more: Best credit cards with extended warranty protection

9. They have built-in grace periods

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Essentially, credit cards offer a zero-interest loan for 30 days or less. Unlike debit cards, credit cards don’t require you to have the funds for a purchase immediately. There’s a grace period for you to make payment arrangements.

This grace period is the time between the end of a billing cycle and the day your payment is due (30 days). During this period, no interest accrues to your outstanding balance. But you must pay the balance in full by the due date. If you don’t, then the grace period no longer applies.

Use this grace period wisely. Even if you pay the bill on time, but not in full, or if you pay it off in full, but not on time, then the interest-free grace period is over.

Read more: How grace periods work (and how to make them work for you)

10. They tack on insurance

Check out the consumer protections offered with your credit card. Chances are you’ll find benefits you didn’t even know you had.

In addition to extended warranties and purchase protection, many cards offer return protection, rental car insurance, and travel insurance.

Read more: Is it worth it to get a credit card just for the insurance benefits?

11. They’re universally accepted

Speaking of travel, your credit card is your best friend when you’re traveling. Accommodations and rental cars are much easier to book with credit than debit. Rental services generally place a hold of a few hundred dollars on your card. This hold can be inconvenient with a debit card.

Credit cards are also more readily accepted than debit cards worldwide. If you’re traveling to a foreign country, plan to use the lower exchange rates on your credit card instead of paying high exchange rates for cash at airports.

Read more: Best credit cards for international travel

12. They have fewer fees

While credit cards can charge high interest rates and may come with an annual fee, they don’t carry the overdraft charges or individual transaction fees that debit cards do.

And if you get a rewards or cash back card, the value of what you earn back could very well cancel out the fee.

Read more: Is an annual fee credit card ever worth it?

Summary

The perks of using a credit card over cash or debit include rewards, protection, and convenience, as well as regular reporting to the credit bureaus, which builds your credit.

The key is to be smart with your card and pay it off each month. Doing that can actually save you cash and keep your money protected. And, depending on which card you choose, you’ll have some nice perks thrown in as well.

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About the author

Amy Bergen Writer
Total Articles: 101
Amy Bergen is a writer and editor based in Portland, Maine. She's interested in technology, literature, and how the world will change in the future. You can reach Amy on LinkedIn, Twitter, or Facebook.