Advantages of credit cards

Credit cards offer a number of useful benefits and advantages when they’re used responsibly.

Let’s take a closer look.

Increased purchasing power

Put simply, credit cards allow you to have more purchasing power — meaning you can spend more than you have in your checking account. This is especially useful for major purchases, emergency expenses, and situations where you need to pay bills while waiting for your next paycheck.

Credit cards come with a credit limit, which is the maximum balance you can have on the card at once. For example, if you’re given a limit of $2,000, that means you can put up to $2,000 in charges on the card. As you pay the card off, you free up more of your credit limit and can continue using the card.

Rewards

One common type of credit card is the rewards credit card. These cards earn rewards points, cash back, or airline miles when you spend on the card. Various rewards programs work differently, but each allows you to earn perks based on your spending activity.

For example, a card might earn 1% cash back. This means that if you make a $100 purchase, you’ll earn $1 in credit card rewards. Another card might earn 1 airline mile per $1 spent, meaning a $100 purchase would earn you 100 airline miles toward free flights.

You can earn rewards even if you don’t carry a credit card balance, so you can utilize this perk without spending anything on interest. Some people choose to use credit cards for everything to rack up their rewards.

Want to maximize the rewards you earn with credit cards? Learn how Kudos can help you pick the best card to use every time you shop!

Purchase protections

Some credit cards offer purchase protections. While their details vary depending on the card, purchase protections can:

• Reimburse you if an item you buy is lost, stolen, or damaged within a certain period after its purchase
• Extend the period an existing manufacturer warranty covers
• Refund you the difference if the price of the item decreases after you buy it

The details of purchase protection perks vary significantly, so check your card benefits for specifics.

Flexible repayment

Credit cards offer a simple way to borrow money and repay it over time. And, unlike traditional loans, they’re very flexible in terms of how you repay your debt.

You’ll always need to make the minimum payment on your credit card, but this is typically a very low amount. You can always pay more, but you aren’t required to.

For example, say you have a $2,000 balance on a credit card. Your minimum monthly payment will likely be between $20 and $40. You can pay more than the minimum payment — you can even pay off the full $2,000 right away. The more you pay, the more you’ll save in interest — but the benefit is that you can be very flexible with a repayment plan that fits your budget.

Note: If you only make the minimum monthly payment, you’ll pay significantly more in interest. And over time, your balance might actually continue to grow, even if you don’t spend any more!

Credit building

Using a credit card can help you build credit and improve your credit score — so long as you use it responsibly. This is particularly useful for young adults who might not yet have a well-established credit history.

To build your credit, be sure to make your payments on time each month. It’s also wise to avoid using up your full credit limit.

Credit score access

Many credit cards offer access to credit score information. For instance, many banks have credit score info built into their online banking platforms for credit card customers.

This perk helps you know your credit score and even provides insights into how to improve your score.

Low-cost short-term loans

If you’re in a pinch and need a short-term loan to bridge the gap, credit cards can be a good option.

Interest rates on credit cards are high, so holding debt long-term is costly. However, for short-term loans, the expense can be minimal.

If you pay off your full balance before the due date, you won’t pay anything in interest. Credit card billing cycles run for around 30 days, and the payment is typically due around 21 days after the billing cycle ends.

This means that a purchase made at the beginning of a billing cycle could be interest-free for around 50 days. After that, you’ll pay the current credit card APR, which can range from 15% to 36% or higher, depending on the card and your credit score.

Other perks

Certain cards have other perks, as well. Some credit cards offer travel benefits, like free rental car insurance or airport lounge access. Others might offer free digital memberships, discounted products, or special deals via partners.

Because each card is different, it’s important to check the details of the card’s perks on the credit card company’s website.

Disadvantages of credit cards

Of course, credit cards aren’t without their downsides. The biggest and most obvious downside is debt.

Credit card debt can be extremely costly. Interest rates can be 15% to 36% or even more — much higher than most other forms of debt.

It can also be difficult to get out of debt once you’re in it, thanks to these sky-high interest rates. For this reason, credit card debt can be a slippery slope.

If you’re in a situation where you must rely on debt to pay your expenses, looking for a lower-interest loan may be beneficial. For instance, personal loans may have lower interest rates than credit cards.

Another downside is that credit cards can make it easier to overspend. Since you can quickly and easily put a purchase on a credit card without having to worry about paying the card off right away, it can be tempting to spend more than you can afford.

Fortunately, the main downsides of credit cards can be avoided with responsible, thoughtful use. If you learn responsible credit usage, you can utilize the advantages of a credit card while avoiding many of the downsides.

Get the most out of your credit cards with Kudos

Want to maximize your credit card perks? Kudos is the solution for you!

Kudos is a Chrome plugin and app that helps you find the best credit card for each purchase you make. Kudos’s smart wallet calculates the credit card rewards and benefits of each card you have and lets you know which one to use when you’re checking out online. The plugin works for over 1 million merchants, so you can automatically maximize your credit card perks wherever you shop!

If you don’t have a good credit card to use yet, Kudos has you covered too. Our Explore Cards feature helps you find the perfect credit card for your spending habits. Kudos helps you estimate your rewards from various credit cards so that you can pick the best option for your situation.

Wrapping up

Credit cards offer a number of significant perks, so long as they are used responsibly. If you pay off your balance in full each month, you can enjoy many of these perks without paying anything in interest!

To get the most out of your credit cards, use Kudos. Kudos helps you understand and utilize all the benefits of your credit cards, and it can also help you find the right credit card to use in any situation.