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The reason nearly every purchase 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, they help budgeting more easily and also are rewarded with 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 is a former credit card author for NerdWallet. She is a journalist who has covered personal financial, business, real estate as well as architecture and design. Her work has been published in The Philadelphia Inquirer, The New York Times, The Awl and Mental Floss.
and Paul Soucy Lead Assigning Editor Credit scoring, credit cards and personal financial Paul Soucy has led the Credit Cards content team at NerdWallet since 2015. He served as an editor for 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 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 highest award by ACES: The Society for Editing. He holds a bachelor's in journalism, as well as a Master of Business Administration. His home is in Des Moines, Iowa, with his fiancée, his two sons, and the dog Sam.
Updated on Nov. 3, 2022.
Editor: Paul Soucy Lead Assigning Editor Credit cards, credit scoring Personal finance 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 more than 20 years. He also built a successful freelance editing and writing practice that focuses on personal and business finances. He was editor of the USA Today Weekly International Edition for six years, and was awarded the most prestigious award of the year from ACES: The Society for Editing. He has a bachelor's degree in journalism and a Master of Business Administration. His home is in Des Moines, Iowa, with his wife, two sons and the dog Sam.
Many or all of the products featured here are from our partners who compensate us. This impacts the types of products we review and where and how the product appears on the page. However, this doesn't affect our opinions. Our opinions are entirely our own. Here is a list of and .
More Like This
Cash was the most popular option. People paid for everyday purchases using cash or checks (which are functionally equivalent to cash), and they saved credit cards for big, infrequent purchases -- If they were carrying credit cards at all. Nowadays, credit cards are accepted virtually everywhere, and some do not carry cash at all.
In general, NerdWallet recommends whenever possible:
Credit cards are safer to carry than cash and are more secure against fraud than debit.
You can reap significant benefits without changing your spending habits.
It's easier to monitor your spending .
Responsible credit card use is among the easiest and fastest methods to build credit .
Utilizing credit cards . Spend your money as normal, pay the balance in full each month, and you'll reap the advantages of credit cards without carrying debt or paying any interest.
The top credit cards to be used in 2023.
Cash back and 0% APR transfers of your balance -- check out our Best-Of Awards for 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 you were carrying will likely be gone for good. If thieves go on a shopping on your credit cards, you generally won't be held accountable for any the fraudulent purchases. It may take some time to sort out the resulting mess, but you won't lose any of your cash.
Debit cards, too, pose a risk. If your credit card gets used fraudulently and the card issuer is the one who loses the money. When your debit card has been used fraudulently, . If you notify the fraudster promptly and report the fraud, you will receive your money backeventually. It may take a while until the issue is resolved. During this time the checks could bounce, automatic payments might be denied because of insufficient funds and you may have difficult time paying the costs of your bills.
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Credit cards earn easy reward points
Credit card rewards encourage you to use your credit card, and are very persuasive indeed. With a simple flat-rate card that pays the same amount for each purchase, you could earn back 1.5 percent, or even percent of every dollar you spend, whether in cash or miles or points to use to travel or for other items. If you spend $1,000 per month and you can earn between $180 and $240 per year without any special effort.
Other cards offer greater rewards for specific areas of spending, such as groceries, gas or restaurants. Combining a few cards, and you can amplify your rewards considerably.
As an example, suppose the family has four cash back credit cards -- the , the , the and the . Utilizing them in a strategic manner, that family could earn hundreds of dollars per year from cash back
Spending
Rewards rate
Annual rewards
Groceries
$400 per month
6%
$288
Restaurants
$150 / month
*5% over three months
* 3% for nine months
$81
Gas
$100 / month
* 5 % for six months
* 3% for six months
$48
Amazon.com
$100 / month
* 5percent for six months
* 2.2% for six months
$42
Media streaming
$50 per month
6%
$36
Travel
$1,000 / year
5%
$50
Everything else
$1,000 a month
2%
$240
TOTAL
$785
Find out how the rewards are earned
Groceries
The Blue Cash Preferred(r) Card from American Express earns 6% cash back up to $6,000 per year spent at U.S. supermarkets, then 1percent (terms will apply -- check ).
Restaurants
Three months in the it(r) it(r) Cash Back earns 5% cash back on up to $1,500 per quarter in spending in categories you can activate and 1% on other purchases. In 2020, restaurants was a 5% category for one quarter.
For nine months, the Flex(sm) from Chase Flex(sm) earns 3% cash back at restaurants.
Gas
For three months: The Chase Freedom Flex(sm) earns 5 percent cash back on up to $1500 of spending in quarterly categories that you choose to activate. The year 2020 was the last time Chase included gas stations in a category with 5% during three months.
For three months: In 2020 The It(r) Cash Back program was introduced. it(r) Cash Back had gas stations as an 5% category for three months.
The card is valid for six months. The Blue Cash Preferred(r) Card of American Express earns 3% cash back at U.S. gas stations (terms apply).
Amazon.com
For six months: In the year 2020 Chase and Discover had Amazon.com as an 5% category for three months each.
For six months: The Citi(r) Double Cash Card earns cash back of 2% on all purchases . You earn 1cent when you purchase and 1% when you pay it off.
Streaming media
The Blue Cash Preferred(r) Card from American Express earns 6% cash back on select U.S streaming services (terms must be adhered to).
Travel
The Chase Freedom Flex(sm) gives you 5 percent cash back on trips that is booked through Chase.
Everything else
Make use of this Citi(r) Double Cash Card and earn 2% cashback.
An important note of warning however: Don't spend more than you normally would just to get extra rewards. A little cash back will not make up for the additional $100 at the supermarket store or that extra $250 worth of clothes. And if you carry an account balance from month month the interest you accrue will more than take the value of your rewards and you should pay it all in full whenever you can.
>> MORE:
Credit cards help you track spending
Maintaining a budget can be a challenge no matter how you spend your money. But figuring out where cash went is particularly difficult. You can lose receipts, and there's often no other record of how much you spent or where your money was spent. Checks? Don't remember to add one to your check register and you'll have to wait for the recipient to cash it before you can trace it (and some people are notorious for storing checks for months).
Credit cards are a great way to ensure that everything shows up on your account online in real time. Further some issuers automatically categorize purchases in accordance with the merchant:
Purchases made with an Chase credit card identified by categories.
The majority of major issuers let you generate reports to see how much you've invested in various categories during a given month, or for the entire year or for a time period you specify:
Spending report for an Chase credit card.
If you use a budgeting app like Mint or You Need a Budget, you can import information from your credit card and bank accounts. It's easy to put each purchase into the budget category and to identify areas where you're spending too much and where you can stand to spend a bit.
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Credit cards help build credit
You don't need to have a credit card to have excellent credit score, and you certainly don't have to keep the balance. However, judicious use of a credit card is the most effective way to improve your credit scores and a good credit score can open many opportunities. It makes it easy to get housing, whether a potential landlord is examining your credit score prior to granting you keys or applying for a mortgage to buy a home. Insurance agents and utility companies also could use your credit history to determine your eligibility and even your rates. It could even increase your chances of getting a job, as many employers run credit checks on applicants for jobs.
If you have a credit card, making regular small purchases making sure your balances are low and making sure you pay your bills punctually will boost your credit score in the long run.
>> MORE:
It is not advisable to make use of a credit card
You'll be required to pay an additional fee: Merchants pay processing fees every time you make use of credit card. Most of the time, those charges are included in the price of the merchant, just like other costs associated with doing business. However, sometimes, a business may transfer the cost of processing to you directly by adding an upfront fee or "convenience fee" for the use of cards with credit. In these instances it's likely that you'll need to pay with a different method, unless your rewards on credit cards are high enough that they'd cancel out the surcharge.
If you don't want to force the merchant to be charged a fee Also, you might be able to steer clear of using credit cards for smaller merchants that you would like to help. They may be happy when you pay with cash or via check, because then they don't have to pay the processing fees. Even debit cards are better than credit cards offered by merchant's perspective, since processing fees for debit cards can be lower than the fees they'd pay for a credit card transaction.
If you don't want to overspend: Some people struggle to keep their spending under control when they use a credit card. A credit card limit of five figures can make it difficult to recall the reasons you shouldn't buy that shiny object. If you're getting close to your credit limit or you're concerned about accruing an excessive credit card balance it's possible to pull out your debit card or use cash.
There are many positive benefits for consumers who use credit cards. Find out the best one for you. Just make sure you're able to make wise spending decisions, regardless of the method of payment you decide to use.
>> MORE:
To see rates and fees of the Blue Cash Preferred(r) Card from American Express , see .
The authors' bios: Virginia C. McGuire is a former credit cards editor for NerdWallet.
Paul Soucy is the lead credit cards editor for NerdWallet. He's worked for USA Today and the Des Moines Register and has an MBA.
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