As part of a personal money management plan, credit cards can offer a wealth of benefits and options. Some of these benefits include product purchase protection, extended warranties, free rental car insurance, discounts and access to early event ticketing. While credit card usage should be carefully planned and monitored, proper usage can be an important part of your personal finances.
Building Credit
Regular credit card usage and responsible, on-time payments can help build or improve your personal credit score. Credit card debt is considered a non-secured type of debt and can be a major factor in your overall credit score.
Reserve Cash
Using a credit card can help protect cash reserves and provide a beneficial payment option. For example, if you are on vacation and have limited access to an ATM or local bank branch, using a credit card can allow you to reserve on-hand cash for situations where credit card usage is not an option. Credit cards can also provide an option for major purchases that might otherwise drain your available cash.
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Insurance
Some credit card issuers offer various types of insurance to cardholders. Examples can include free rental car coverage, extended product warranties and travel protection. Access to these benefits usually requires usage of the applicable credit card during the purchase of services or goods.
Purchase Protection
Using a credit card to make retail purchases can provide many options for charge disputes or other issues. For example, if you pay for hotel rooms while on vacation and are charged fees that were not disclosed by the property, your credit card issuer may offer help with disputes or refunds.
Exchange Fees
Utilizing a credit card to make purchases or pay for services in foreign countries can help reduce currency exchange charges. In most cases, your credit card issuers will process the transaction, then charge you an exchange fee based on the most current rates. There is usually no additional transaction fee or minimum fee as can often be found at local exchange offices.
Rewards
Credit card reward programs can offer a wide range of benefits and products. Some examples include airline reward miles, retail gift cards, consumer products, travel rewards or even cash. Each card program is different and offers rewards based on its own requirements.
Financial Management
Paying for goods, services and monthly expenses can allow you to manage your personal finances from a single source. Many credit card issuers also provide tracking, planning and management software through their website.
