There is a popular belief that using a credit card as your financial tool will end you up in a trap of debts. This is because we see and hear how many people spend on their credit cards recklessly. With that said, if you are financially disciplined in utilizing your credit card, it is safe to say that it would be a much better option for you rather than having a debit card.
Keep on reading to get to know the many benefits of having a credit card and using it strategically to get the most out of your expenses.
1. One-time Bonuses
One exciting thing about signing up for a new credit card is the initial bonus customers get whether a foreign currency or other rewards. Applicants with good or excellent credit have the opportunity to be offered bonuses that are worth more than what you spend. Credit card benefits like this are usually given to those who pay well and does purchase the minimum spend their credit cards can offer. This offer can be available in the first few months after the account is created, once you start your first purchase like groceries, daily essentials, or other purchases. You’ll receive the bonuses and rewards once you started using the credit card.
Remember, these bonuses that come in rewards and points or air miles are redeemable in exchange for several things such as; travel discounts, cash rebate, gift cards, groceries, statement credits, or checks. As opposed to a debit card that allows cardholders to check their bank accounts, it does not have a one-time bonus or points when users spend.
2. Great Deals and Cashback Guarantees
Cash back on credit cards give back a certain amount of money through the sum of what you spend. This is alike a concept of a rebate. Commonly, users would be paid back 1 to 2 percent of the total amount that they used to make a purchase.
As an example, if the credit card issuer offers 1 percent of cash back to their customers who purchases and use the credit card, therefore users of credit cards will receive $0.01 for each dollar spent. Meaning to say, one will earn $10 when spending a total of $1,000.
Nowadays, some companies even have an offer of up to 2% and 3% of cash back when customers spend on selected items or services. With that said, high cash back rates would usually require annual spend caps or credit limits.
The best and the most preferred cash backs terms are those that impose low fees and interest while still giving a high rewards rate. Credit card products like cash back or cash rebates are advantageous to cardholders, especially toward those who pay their credit statement every single month.
3. Get Rewards and Discounts
Rewards and frequent flyer credit cards permit customers to accumulate reward points on every cash that is spent on purchases that are eligible for redeeming. This may include groceries and even fuel. Not only that, but cardholders are also entitled to discounts on purchases and air miles rewards when they fly with partner airlines and stores that participate in the company’s reward programs.
If it is redeemed as a statement credit, miles per transaction on your credit card would be equivalent to a cent worth or miles per transaction. Frequent flyer miles that are given to you when you fly with partner airlines or using the airlines’ branded card, you can redeem it when purchasing an award ticket.
You can now travel without any worries. By owning a credit card, you would not have to think about the hassle of carrying around an amount of cash or foreign currency abroad. What is more; cardholders are able to gain free travel insurance, depending on your credit card.
With unpredictable occurrences when traveling to brand new places, you may be a victim of pickpockets or you may lose some of your cash. However, with a credit card, it is only required of you to cancel the card and lodge a police report of the loss.
Safety is probably one of the main concerns when it comes to financing. Having a credit card covers you with a security net whenever you purchases things. When you happen to lose your debit card, it is as if you have lost an amount of cash. If you have already scheduled online payments or mailed checks, these transactions may not be successful since the remaining balance in the card would be insufficient when it has been used unauthorizedly.
In this instance, even if losing your debit card may not be your fault, but overdue payments may still affect your credit score even if it’s classified as minimum spend. As we already know, it would take some time for banks to recover the amount spent without your permission back into your account.
On the other hand, losing your credit card does not equate to using your money immediately. All you have to do is to give notice to your credit card issuer of the fraud incident like unauthorized online shopping and you would not have to pay for the outlawed transactions. Also, there is no payment from your end that needs to be done.
5. Keeping Vendors Honest
If you are going to make a big spend on an expense, using a credit card is the way to go. Paying with a credit card, your credit card issuer withholds the money before actually cashing it to the seller you had the transaction with. If anything happens to go wrong, you are not going to lose your money or affect your credit limit.
As an example, if you hire a contractor to work on your house compound. They had all work done over the weekend. However, a few days after you have realized that the roof work had parts that are still incomplete and had several leakage points. Your home yard gets wet when it rains. Still, they have charged you a certain amount of cash for that and you would pay with your credit card.
Of course, you would be fuming and frustrated over the unsatisfactory job. But despite that, you don’t need to stress out because of the unsatisfactory job that you already “paid.” As said earlier, the money does not instantly get cash out and given to the contractor.
In most cases, credit card companies have a mechanism to resolve this matter. Not only will you get your money back, but some companies may also even assist you to find a better contractor to get the mess repaired or the design renewed.
6. Grace Period
In comparison to purchasing through a debit card, you would use up your money there and then right after you have made your payment. With a credit card, though, the amount you have used for your expense will prevail in your checking account up to the time that you pay off your credit card bill.
You might be asking – how is that beneficial to me? Well, holding on to the amount you pay for a little longer may help you with the time value of money. Detainment of your payments will turn your purchases a little bit cheaper than it actually is. Plus, your own cash will stay in your bank account for a longer time.
Thereupon, when you pay with your credit card from an interest-bearing check account and later you get your money within the grace period, the remaining will be added up to a significant amount. You also don’t need to monitor your bank account as frequently and as meticulous you have been previously.
It is not widely known, but a lot of credit cards subscription already comes with several consumer-centered benefits. This includes rental car insurance that is usually secondary to your personal auto insurance, travel insurance, and protection as well as product warranties that are longer than what the actual manufacturers offer for their customers.
8. International Payments
Some credit card issuers do not impose international transaction fees for their clients even if the transaction is above the minimum spend. Not to mention, there are some purchases like renting a car or staying in a hotel without using cashing in for foreign currency, is much preferred to be paid through a credit card.
This is because rental car agents and hotels may charge customers according to what customers may add or have damaged when they are paying with a credit card. As opposed to paying with a debit card, workers would not know the total amount of payment for your expense, unless payment is made prior.
In turn, agents and companies would be left with no other choice but to block a certain amount in your credit card that is ready for use to protect themselves from unexpected charges.
Thus, paying your expenses in relation to these matters with a debit card may cause the establishment to temporarily hold a few hundred dollars or your account, or commonly known as a “deposit.” Moreover, when you are abroad, you would have to activate international transactions on your debit card before your travel. Even so, some companies do not accept any debit card, only a credit card.
9. Build Credit History
If you are trying to build a credit score or trying to improve your existing scores, utilizing a credit card with discipline and conscience may help you get what you want. This is due to the fact that credit card issuers will frequently report your card and payment activity to credit bureaus. The more responsible you are with your dues, the better your scores will be over time.
With a debit card, however, your card and payment activities are not recorded in your credit report, later on, so your spending does not help you improve your credit score.
10. Should I Use a Credit Card?
Even with all of the benefits, we have listed for you above, usage of credit cards would be best suited to some and not others. After much consideration of whether to subscribe to a credit card company or not, these aspects may help you make a better decision for your financing.
A credit card is best suited for your needs if you are:
- Are at least 21 years of age
- Are a Singapore citizen, permanent resident or hold an eligible temporary visa
- Have a fixed, regular and stable source of income
- Consistently pay your bills when it is due
- Wish to separate some transactions off your daily bank account
- Want to earn rewards in exchange for your spending
- Need a more flexible cash flow
- Able to pay a little extra due monthly for the convenience
Owning a credit card is surely a joy for your financing if you are able to fork out little extra funds for your monthly repayment as well as having the convenience to enjoy your spending. The number one key to having a credit card is mindful and responsible financing. If you are good with that, the redeemable benefits like rewards and points, several kinds of protection and security as well as having control of your cash is definitely a bliss will put your worry of spending at bay.
You may ask yourself which credit card is best in Singapore? Well, you need to take into consideration a lot of options like how you want to use your credit card, the annual fee, the credit limit, and rewards among other factors. On the premise, we highly advise that you first get to know the plethora of options you have to choose from. Credit card companies have different rates, as well as benefits, terms and conditions. Some you may appreciate more than others.
Hence, we recommend that you get your research done through Loan Advisor. It is a website that is ready to help you compare all available lenders with the services and goods that they offer.