Credit cards are a convenient way to cover the purchases you make every day. They are also an excellent tool for building your credit — when you use them responsibly. However, you may be wary of potential drawbacks.
Like anything else, using credit cards for everyday purchases has its benefits and disadvantages. Researching the good and the bad can help you decide which payment method is right for you. Experian.com explains the benefits of using credit cards for recurring purchases.
Why Use Your Credit Card For Recurring Purchases?
According to Experian, credit cards offer many benefits when used for recurring purchases, like autopay. This feature can protect your credit score by making sure you never miss a monthly payment. But there are many other benefits, too. Here are a few to consider.
You Keep Your Account Open And Active
Lenders sometimes close inactive credit card accounts. Many credit card issuers don’t offer specifics about their policies, but leaving an account that’s been dormant for an extended time offers them little benefit. Make sure you review your card’s fine print to learn more about its inactivity policy.
As much as closing unused credit cards helps the issuer, it does little to help you. First, it increases your credit utilization ratio because it diminishes the amount of available credit you have. Secondly, it can shorten your credit history, which accounts for 15% of your FICO credit score.
You Can Avoid Scammers And Fraud
The Fair Credit Billing Act protects you from paying more than $50 if your card is used to make fraudulent purchases. Plus, most credit cards have some fraud protection in addition to the law. In many cases, you may not have to pay for anything. Knowing that you have several protections in place should help you feel more comfortable about using a credit card for recurrent purchases.
Why Use Your Credit Card For Daily Purchases?
Just as there are several benefits to using a credit card for recurring purchases, there are just as many when it comes to everyday spending as well. If you have a credit card with cash back or points for gas, groceries, or leisure, you can enjoy significant savings on things you buy every day. Of course, make sure that you compare providers, cards, and offers so you can find the best one for you.
But in addition to generous rewards programs, many card companies provide consumer protections like extended warranties on products, purchase protection, travel insurance, and more.
What Are The Drawbacks Of Using Credit Cards For Daily Purchases?
The only way that using your credit card to pay for everyday goods and services is if you have a budget to make sure your spending doesn’t get out of control. It can be tempting to swipe your plastic for every little thing until you’re stuck with a considerable balance at the end of the month.
It’s true that credit card spending offers you many advantages and can be a smart financial move. However, falling behind on payments, forgetting to pay your bills, and other bad habits could leave you facing a mountain of debt.
Instead, your best bet is to use your card for things you know you will pay back completely every month. If something unexpected occurs — such as the coronavirus pandemic or a job loss — try to keep your credit utilization ratio below 30%. This will keep your debt from affecting your credit score.
Which Credit Cards Provide Fraud Protection?
If your credit card is lost or stolen and used to make fraudulent purchases, the most you will have to cover is $50. However, these credit card companies provide even more measures to maximize your security — and peace of mind.
- Capital One Venture Rewards Credit Card
- Discover it Cash Back
- City Double Cash Card
No matter if you need a credit card for monthly bill pay or something for everyday use, make sure you compare each card’s features, benefits, fees, and other factors before applying. It’s also just as important to keep your personal information safe and secure. Consider signing up for free credit monitoring services, especially if a particular issuer offers this service. The credit card company will notify you whenever your information turns up on the dark web so you can prevent possible theft before it happens.
- Hayes, Marianne. “Should I Only Use a Credit Card for Bills and Recurring Transactions?” Experian, Experian, 5 Nov. 2020, www.experian.com/blogs/ask-experian/should-i-only-use-a-credit-card-for-bills-and-recurring-transactions/.