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A Reason Nearly All Purchases Should be made using a credit Card
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The reason nearly every purchase should be made with a credit Card
Credit cards are secure and convenient they can help you build credit, help budgeting more easily and can earn rewards. And no, you don't have to go into the debt trap, and you aren't required to pay for interest.
Written by Virginia C. McGuire Virginia McGuire was previously a credit cards writer for NerdWallet. She is a journalist who has covered personal finance and real estate, business, architecture and design. Her work has appeared in The Philadelphia Inquirer, The New York Times, The Awl and Mental Floss.
and 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 worked as an editor at USA Today, The Des Moines Register and the Meredith/Better Homes and Gardens family of magazines for over 20 years. He also built a successful freelance writing and editing practice that focuses on personal and business finances. He was editor of USA Today Weekly International Edition for six years and won the highest distinction of the year from ACES: The Society for Editing. He has a bachelor's degree in journalism, as well as a Master of Business Administration. His home is in Des Moines, Iowa, with his wife, two sons, as well as the dog Sam.
Updated on Nov. 3, 2022.
Written by Paul Soucy Lead Assigning Editor Credit scoring, credit cards personal finance 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 built a successful 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 was awarded the most prestigious honor of the year from ACES: The Society for Editing. He holds a bachelor's degree in journalism and a Master of Business Administration. The family lives in Des Moines, Iowa, with his fiancée, his two sons, and an animal named Sam.
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A LOT LIKE THIS
Cash was the most popular option. The majority of people paid for their purchases with cash or checks (which can be used in a similar way to cash) They also kept credit cards in reserve for large, infrequent purchases -- If they even had credit cards. Today, the credit cards can be used virtually everywhere, and some people don't even carry cash.
In general, NerdWallet suggests whenever it is possible:
Credit cards are safer to carry than cash and provide better protection against fraud than debit.
You can reap substantial rewards without changing how you budget.
It's easier to track your spending .
A responsible use of credit cards is one of the easiest and fastest ways to build credit .
Credit cards are a great way to spend money . Spend your money as you normally would, and pay your balance on time each month, and enjoy all the benefits of credit cards without carrying debt or paying an interest fee.
The top credit cards for 2023.
Cash back and 0% APR transfers of your balance -- shop our Best-Of Awards for the top credit cards of the year.
>> MORE:
Credit cards are safer to carry and to use
If you lose your wallet, or are robbed, any cash that you had in your wallet is almost certainly gone for good. If thieves are on a spending spree with your credit cards, you generally won't be held accountable for any the fraudulent purchases. It may take some time to clean up the mess, but you'll not lose any money.
Debit cards, too, pose a risk. If your credit card gets misused it is the issuer who loses the money. When your debit card has been used in a fraudulent manner, . If you report the fraud immediately, you should get your money back -at some point. It may take a while until you are able to sort things out. During this time there is a chance that checks will bounce. automatic payments might be denied due to insufficient funds, and you could face a hard time covering the costs of your bills.
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Credit cards earn easy reward points
Credit card rewards make it easier for customers to make use of their credit card, and are highly persuasive. With a basic flat-rate card that offers the same amount for each purchase, you'll get back 1.5% or even 2 percent of every dollar you spend, whether in cash, points or miles to redeem to travel or for other items. If you spend $1,000 per month and you can make between $180 and $240 each year with no effort.
Other cards offer more rewards in certain areas of spending, such as food, gas or dining out. Take a couple of cards, and you can amplify your rewards considerably.
For example, say the family has four cash back credit cards -- the , the , and . By strategically using them, the family could make hundreds of dollars each year from cash back
Spending
Rewards rate
Annual rewards
Groceries
$400 / month
6%
$288
Restaurants
$150 a month
* 5% per three months
* 3% for nine months
$81
Gas
$100 / month
* 5% for six month
* 3% for 6 months
$48
Amazon.com
$100 / month
* 5percent for six months
* 2.2% for six months
$42
Streaming media
$50 per month
6%
$36
Travel
$1,000/year
5%
$50
Everything else
$1,000 / month
2%
$240
TOTAL
$785
See how the rewards are earned
Groceries
The Blue Cash Preferred(r) Card from American Express earns 6% cash back on up $6,000 per year spent at U.S. supermarkets, then 1percent (terms are applicable -- check ).
Restaurants
For three months: The it(r) it(r) Cash Back program gives you cash back of 5% on up to $1,500 per quarter of spending on categories you choose to activate, and 1% on all other purchases. In 2020, dining out was a 5% category for one quarter.
For nine months, the Flex(sm) from Chase Flex(sm) earns 3% cash back at restaurants.
Gas
Three months in a row: The Chase Freedom Flex(sm) earns you 5% cash back on up to $1500 of spending in categories for quarterly that you can activate. For 2020, Chase had gas stations as a 5% category for three months.
Three months in a row: 2020, it(r) Cash Back was a part of the it(r) it(r) Back Cash Back included gas stations in a 5% category for three months.
The card is valid for six months. Blue Cash Preferred(r) Card from American Express earns 3% cash back at U.S. gas stations (terms apply).
Amazon.com
For six months in 2020, Chase and Discover had Amazon.com as the 5% category three months at a time.
In the course of six months, The Citi(r) Double Cash Card earns cash back of 2% on all purchases -- 1% when you buy and 1% when you pay it off.
Streaming media
The Blue Cash Preferred(r) Card offered by American Express earns 6% cash back on select U.S streaming services (terms must be adhered to).
Travel
The Chase Flex Flex(sm) earns 5 percent cash back on travel made through Chase.
Everything else
Make use of the Citi(r) Double Cash Card and earn cash back of 2.
A word of caution but don't spend more money than you would in order to earn additional benefits. The cash you earn won't make up for that extra $100 at the grocery store , or the extra $250 worth of clothing. If you carry an unpaid balance from month to months the interest you accrue can significantly reduce the value of your reward, so pay in full whenever possible.
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Credit cards allow you to track your spending
Keeping tabs on your budget can be difficult no matter the way you make use of your cash. However, finding out where money went is particularly difficult. It's easy to lose receipts and there's often no other record of how much you spent, and the location you spent it. Checks? Don't remember to add one to your check register and you'll have be patient for your recipient to cash it before you can track it (and some people are notorious for keeping checkbooks for month-long periods).
Credit cards are a great way to ensure that everything shows up on your online account in close to real time. Additionally the majority of issuers automatically categorize transactions by merchant
The purchases made on the Chase credit card are identified by categories.
Most major issuers also offer reports that allow you to see how much you've invested in various categories during one month, for the year to date, or for a period you select:
Spending report for the Chase credit card.
If you're using an app for budgeting, such as Mint or You Need a Budget, you can import data from your bank and credit card accounts. It's easy to fit each purchase into a budget category and identify areas where you're spending too much and areas where you could stand to splurge a little.
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Credit cards help build credit
There is no requirement to use a credit card to have excellent credit score, and you definitely don't need to maintain a balance. But careful use of credit cards is the best method to improve your credit scores and, with good credit, opens many doors. It makes it easier to locate housing, whether a potential landlord is checking your credit before giving you the keys or you're applying for a mortgage to buy a home. Cell phone providers, insurance agents and utility companies may use your credit score in determining your suitability and even your rates. This can increase your chances of landing a job, as many employers run credit checks on applicants for jobs.
If you have credit card, you can use it to make regular small purchases, keeping your balances low and making sure you pay your bills promptly will increase your credit score over time.
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Not to use a credit card
If you'll need to pay an additional cost The merchant pays processing fees every time you make use of credit card. Most times, these charges are included in the merchant's prices, like any other expense associated with running a business. But sometimes a merchant might transfer the cost of processing to you directly by adding an upfront charge as well as a "convenience fee" to use the credit card. In these instances you'll likely need to pay with a different method, unless your rewards on credit cards are enough to cancel out the cost of the surcharge.
If you don't want the merchant to pay fees Also, you might be able to steer clear of using credit cards from smaller businesses that you would like to help. They might appreciate it if you pay in cash or via check, because then they don't have to pay the processing fees. In fact, debit cards are much better than credit cards from merchant's perspective, since processing fees for debit cards can be lower than what they'd be charged for a credit-card transaction.
When you don't want to overspend: Some individuals are unable to keep their spending under control when using a credit card. That five-figure credit card limit can make it difficult to recall the reasons you shouldn't spend your money on the latest gadget. If you're getting close to your credit limit or you're concerned about accruing a high credit card balance it's possible to pull out your debit card, or even cash.
There are plenty of wonderful benefits to customers of credit cards. Find out the best one for you. Make sure that you're able to make wise spending decisions, regardless of the method of payment you choose.
>> MORE:
For rates and charges associated with the Blue Cash Preferred(r) Card by American Express , see .
About the authors: Virginia C. McGuire was a former credit card author for NerdWallet.
Paul Soucy is the lead credit card editor at NerdWallet. He has previously worked for USA Today and the Des Moines Register and holds an MBA.
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