7 Benefits of Making Purchases on Your Credit Card

Whether you're shopping online or in person at your favorite retailer, you reach a part of the transaction where you must pay for the items you’re purchasing. In most cases, your payment options will include cash, check, gift card, debit card, or credit card.

For millions of Americans, the answer is often a credit card, which allows you to make an immediate purchase and pay for it later. According to TransUnion's Q4 2022 Credit Industry Insights Report, over 518 million credit cards are in circulation in the U.S.

There's a reason credit cards have become the go-to payment option among consumers. Credit cards offer several benefits and protections not available with other forms of payment. Here are seven benefits of making purchases on a credit card.

1. Ability to finance purchases

One of the primary reasons people use credit cards is to make purchases without paying for them immediately. Credit cards allow you to charge purchases up to your credit limit and make at least the minimum monthly payment. Most credit cards enable you to carry a balance from month to month. If you do this, the card issuer charges interest on the remaining balance until you pay it off. Some cards, called charge cards, require full payment of your balance each month, but not many people use them.

Many credit cards come with introductory 0% APR on new purchases or balance transfers, allowing you to finance purchases over time without incurring expensive interest charges.

2. Fraud protection

Credit cards are one of the safer payment options thanks to the fraud protections included with them. Most cards come with $0 liability for unauthorized charges, which means you’re not responsible for unauthorized charges if your card is lost or stolen.

Card issuers often include additional features and tools to protect cardholders. Common features include security alerts for suspicious activity, card-locking features, and virtual card numbers.

3. Earn rewards

You can't talk about the benefits of credit cards without talking about rewards. Many credit cards allow you to earn rewards for card spending. Different types of rewards credit cards are available, including travel rewards cards, cash back cards, store cards, and co-branded airline and hotel rewards cards.

Rewards credit cards earn points or miles with every dollar you spend. You can redeem your points for travel, cash back, statement credits, online shopping, gift cards, merchandise, etc. Redemption options will vary among cards. The best rewards credit cards offer bonus rates that align with your spending habits. Many of these cards include generous welcome bonuses if you meet designated spending requirements within the promotional period.

4. Insurance coverage

Some credit cards come with travel insurance benefits and consumer protections when you use your card to pay for specific purchases. Travel insurance coverages may include rental car insurance, baggage delay, lost or damaged bag, trip delay, and trip cancellation and interruption insurance.

Some cards come with added consumer protections for eligible purchases. For example, extended warranty protection gives you an additional year of coverage on eligible card purchases with a qualifying U.S. manufacturer's warranty. Purchase protection covers recent eligible purchases against theft or damage.

5. Improve your credit score

You can improve your credit score through responsible credit card use. By keeping your credit card balances low, you can improve your credit utilization. Your credit utilization ratio—or the amount of available credit you use—is one of the most significant factors in determining your credit score. Also, making on-time payments each month helps you build a positive payment history, another major factor in credit scores. Most credit card issuers allow you to set up automatic payments to ensure you never miss a payment.

6. Expense management

Many credit cards come with digital tools to help you manage your finances, track spending, and even monitor your credit. You can review and categorize transactions, access monthly statements, check rewards balances, and make payments 24/7 online or from a mobile device.

Your card may come with complimentary credit score access or credit monitoring tools. Some credit card companies provide virtual digital assistants to monitor your spending habits, provide insights, and perform basic account tasks

7. Widespread acceptance

Millions of businesses worldwide accept credit cards as a form of payment. Despite merchant fees charged by payment processing companies, credit cards have become the preferred payment method for many retailers and vendors.

As a consumer, you can travel with peace of mind, knowing your credit cards will be accepted no matter where you are in the world. And with the security measures and consumer protections touched on earlier, credit cards are one of the safest forms of payment when traveling. It’s also important to note that many rewards cards waive foreign transaction fees, an added fee sometimes charged by card issuers on purchases made outside the U.S.

When Not to Use a Credit Card

As you can see, credit cards have many clear benefits, but there are scenarios when you shouldn't use one.

You have credit card debt

Not all debt is bad, but if you have considerable credit card debt, it's best to put the cards away until you can pay down your balances. Credit cards typically carry higher interest rates than other lending products, making it easier for balances to snowball, especially if you only make minimum monthly payments.

You struggle with overspending

Credit cards are great for financing purchases, but eventually, you have to pay for those purchases. Modern shopping methods offer endless ways to use your credit card, but it can lead to overspending

If you frequently spend beyond your means, consider using a debit card or cash for more accountability.

TIME Stamp: Take advantage of credit card protections and rewards, but use responsibly

Credit cards can help you build credit, access unique consumer and travel benefits, and protect you from unauthorized charges if your card is lost or stolen. But they work best when you practice responsible usage, including:

• Making on-time payments to avoid late fees and negative marks on your credit profile.
• Paying your balance in full each month when possible to avoid interest charges.
• Only using credit cards for expenses that are already part of your budget or can be covered by funds you have on hand.
• Keeping your balances low compared to your credit limits.

Consider your spending habits and preferred benefits, and shop around to find credit cards that align with your needs.

Frequently asked questions (FAQs)

What are the best rewards credit cards?

The best rewards credit cards are typically cards that align with your spending habits and offer other benefits you're likely to use. Consumers' needs vary, so the best card for a friend or coworker may not be the best option for you. The best rewards card also depends on how much you want to spend to access a card's benefits since many rewards cards carry annual fees—some of them hefty. Popular rewards credit cards include the card_name, card_name, card_name, and the card_name.

What are the best cash back credit cards?

The best cash back credit cards earn high rewards rates that match your monthly spending budget and offer other valuable benefits like introductory 0% APR offers and large welcome bonuses. Popular options include Chase Freedom Flex℠, the card_name, the card_name, and the card_name.

What are the best credit cards to help build credit?

All credit cards can help you build credit when used responsibly. However, the best credit-building cards may depend on your current credit status. For example, a secured credit card might be your only option if you have bad credit or a limited credit history. The best secured credit cards include the card_name, the card_name, and the OpenSky® Secured Visa® Credit Card.