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A Reason Nearly All Purchases Should be made with a credit Card
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Why Nearly Every Purchase Should be made with a credit Card
Credit cards are safe and convenient, they help build credit, they make budgeting easier and can earn rewards. No, you aren't required to take on the debt trap, and you do not have to pay interest.
Written by Virginia C. McGuire Virginia was formerly a credit card author for NerdWallet. She is an experienced journalist, who has covered personal financial as well as real estate, business as well as architecture and design. Her work has been published in The Philadelphia Inquirer, The New York Times, The Awl and Mental Floss.
as well as Paul Soucy Lead Assigning Editor Credit cards, credit scoring Personal financial Paul Soucy has led the Credit Cards content team at NerdWallet since 2015. He was an editor with USA Today, The Des Moines Register and the Meredith/Better Homes and Gardens family of magazines for over 20 years. He also developed a highly successful freelance editing and writing business that focuses on personal and business finances. He was editor of USA Today Weekly International Edition for six years, and was awarded the most prestigious distinction by ACES: The Society for Editing. He has a bachelor's degree in journalism as well as a master of Business Administration. He lives in Des Moines, Iowa, with his wife, two sons and a dog named Sam.
Updated Nov 3, 2022
Editor: Paul Soucy Lead Assigning Editor Credit scoring, credit cards, personal financial planning Paul Soucy has led the Credit Cards content team at NerdWallet since 2015. He was an editor with USA Today, The Des Moines Register and the Meredith/Better Homes and Gardens family of magazines for more than 20 years. He also established a profitable freelance writing and editing practice with a focus on personal and business finance. He was editor of the USA Today Weekly International Edition for six years and received the highest award of the year from ACES: The Society for Editing. He holds a bachelor's degree in journalism and a Master of Business Administration. He lives in Des Moines, Iowa, with his fiancee, his two sons, and the dog Sam.
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Cash was the most popular option. People would pay for purchases using cash or checks (which are in essence equivalent to cash) They also stored credit cards for huge frequent purchases -- if they even had credit cards. Today the credit cards can be used virtually everywhere, and a few people do not carry cash at all.
The general rule is that NerdWallet recommends whenever it is possible:
Credit cards are more secure to carry than cash , and are more secure against fraud than debit cards.
You can earn significant rewards without changing how you budget.
It's much easier to keep track of your spending .
Responsible credit card use is among the easiest and fastest ways to build credit .
Using credit cards . You can spend money the way you normally would, pay the balance in full each month, and you'll reap the many benefits of credit cards, without being in debt or paying an interest fee.
The top credit cards for 2023
Cash back and 0% APR balance transfer -- check out our Best-Of Awards to find the year's top credit cards.
>> MORE:
Credit cards are safer to carry and use
When you loose your wallet, or are stolen, any money that you had in your wallet is almost certainly gone for ever. If thieves go on a spending spree with your credit cards it is unlikely that you will be held accountable for fraudulent purchases. It could take some time to sort out the resulting mess, but you won't lose any cash.
Debit cards, too, pose a risk. If your credit card gets misused in a fraudulent manner and the card issuer is the one that loses money. If your debit card is misused, . Assuming you notify the fraudster promptly you'll be able to get your money backeventually. It could be a while until the issue is resolved. During this time the checks could bounce, automated payments may be refused due to insufficient funds, and you could have a hard time covering your bills.
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Credit cards can earn rewards easily
Credit card rewards are designed to encourage you to use your credit card and are extremely persuasive. With a basic flat-rate card that offers the same amount for each purchase, you'll get back 1.5 percent or even 2 percent of each dollar you spend, either in cash, points or miles to redeem for travel or other things. Spend $1,000 a month and you can make between $180 and $240 each year with no effort.
Other cards pay higher rewards in specific spending categories, like gasoline, groceries or restaurants. Combine a handful of cards and you'll be able to amplify your rewards considerably.
For instance, let's say that a family has four top cash back credit cards -- the , the , the and the . Utilizing them in a strategic manner, that family could earn hundreds of dollars a year in cash back:
Spending
Rewards rate
Reward points for each year
Groceries
$400 per month
6%
$288
Restaurants
$150 / month
*5% over three months
* 3.3% for nine months
$81
Gas
$100 per month
* 5% for six months
* 3% for six months
$48
Amazon.com
$100 / month
* 5 % for six months
* 2.2% for six months
$42
Media streaming
$50 per month
6%
$36
Travel
$1,000 per year
5%
$50
Everything else
$1,000 / month
2%
$240
TOTAL
$785
Learn how rewards are earned
Groceries
The Blue Cash Preferred(r) Card from American Express earns 6% cash back up to $6,000 in annual spending at U.S. supermarkets, then 1percent (terms are applicable -- see ).
Restaurants
For three months: The Discover it(r) Cash Back program earns 5% cash back on up to $1,500 per quarter in spending in categories you choose to activate, and 1% on all other purchases. In 2020, restaurants were an area that earned 5% for a quarter.
For nine months: The Flex(sm) from Chase Flex(sm) earns 3percent cash back in restaurants.
Gas
for three months. Chase Freedom Flex(sm) earns you 5 percent cash back the amount of $1,500 spent in categories for quarterly that you activate. In 2020, Chase offered gas station as a category with 5% for three months.
In three consecutive months In 2020, The it(r) it(r) cash Back had gas stations as a 5% category for three months.
In the course of six months The Blue Cash Preferred(r) Card from American Express earns 3% cash back at U.S. gas stations (terms apply).
Amazon.com
For six months: 2020, Chase and Discover had Amazon.com as an 5% category for three months each.
In the course of six months, The Citi(r) Double Cash Card earns you 2% cash back on every purchase -- at 1% when you purchase and 1 percent when you pay it back.
Media that stream
The Blue Cash Preferred(r) Card from American Express earns 6% cash back on select U.S streaming subscriptions (terms apply).
Travel
The Chase Freedom Flex(sm) earns 5% cash back on travel that is booked through Chase.
Everything else
Utilize the Citi(r) Double Cash Card and earn 2% cashback.
One word of advice be sure to not overspend more than you would to gain extra rewards. The little cash reward will not make up for the additional $100 at the supermarket store , or the extra $250 worth of clothing. And if you carry an unpaid balance from month to months, the interest you pay can more than eat up the value of your reward So, pay the full amount whenever possible.
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Credit cards can help you monitor your spending
Monitoring your budget can be a challenge regardless of the method you use to spend your money. But figuring out where cash went is especially difficult. Misplace a receipt, and then there's no record of how much you spent and where your money was spent. Checks? Forget to enter one in your account for checks, and you'll need be patient for your person who received it to cash it before you can trace it (and certain people are known for holding on to the checks over a period of months).
With credit cards, everything shows up on your online account in real time. Further the majority of issuers automatically categorize purchases according to the merchant:
The purchases made on the Chase credit card identified by categories.
The majority of major issuers let you generate reports to track how much you've invested in different categories in one month, for the year to date or over a certain time you specify:
Report on spending for a Chase credit card.
If you're using a budgeting app like Mint and You Need a Budget, you can import data from your credit card and bank accounts. It's easy to fit each purchase into a budget category and determine where you're spending too much, and areas where you could stand to spend a bit.
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Credit cards help build credit
It is not necessary to have credit cards to enjoy good credit and certainly you don't need to keep a balance. But careful usage of a credit card is the best method to boost your credit score and a good credit score opens many possibilities. It can make it easy to get homes, whether a prospective landlord is checking your credit prior to giving you keys or seeking a loan to buy a home. Cell phone providers, insurance agents, and utility companies could use your credit history for determining eligibility, and even the rates you pay. It could even increase your chances of getting an interview, as numerous employers conduct credit checks on job applicants.
If you do own credit card, you can use it to make regular purchases of small amounts making sure your balances are low and paying your bills punctually will boost your credit score over time.
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It is not advisable to use a credit card
You'll be required to pay an additional cost: Merchants pay processing fees every time you make use of credit cards. Most of the time, those fees are rolled into the price of the merchant, just like any other expense associated with running a business. However, sometimes, a business may charge the customer directly, by adding an upfront surcharge (or "convenience fee" for using cards with credit. In such cases you'll likely need to pay in another way except if your rewards from your credit card are high enough that they'd eliminate the cost of the surcharge.
When you don't want the merchant to be charged a fee Additionally, you may prefer not to use credit cards for smaller merchants you especially want to support. They might appreciate it if you pay in cash or with a check, because then they don't have to pay the processing fees. Even debit cards are better than credit cards from merchants' standpoint, because processing fees for debit cards tend to be lower than the fees they'd be charged for a credit-card transaction.
When you don't want overspend: Some people struggle to keep their spending under control when they utilize credit cards. The five-figure limit on credit cards could make it difficult to remember the reason you shouldn't spend your money on that shiny object. If you're getting close to your credit limit or concerned about building up a high credit card balance it's possible to grab your debit card, or even cash.
There are a lot of wonderful benefits to customers of credit cards. Make sure you research the best one for you. Make sure that you're able to make wise spending decisions, regardless of the method you select for payment.
>> MORE:
To see rates and fees for the Blue Cash Preferred(r) Card offered by American Express , see .
About the authors: Virginia C. McGuire is a former credit card writer for NerdWallet.
Paul Soucy is the lead credit cards editor of NerdWallet. He has previously worked for USA Today and the Des Moines Register and holds an MBA.
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