The reason nearly every purchase should be made with a credit Card
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A Reason Nearly All Purchases Should Be on a Credit Card
Credit cards are secure and convenient, they help build credit, they make budgeting easier and also earn rewards. You do not have to enter debtand don’t have to pay interest.
By Virginia C. McGuire Virginia McGuire was previously a credit card author for NerdWallet. She is an experienced 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 cards, credit scoring, personal financial planning 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 built a successful freelance editing and writing practice that focuses on business and personal finance. He was editor of the USA Today Weekly International Edition for six years and received the highest distinction by ACES: The Society for Editing. He has a bachelor’s degree in journalism and a Master of Business Administration. The family lives in Des Moines, Iowa, with his wife, two sons, and the dog named Sam.
Nov 3, 2022
Written by Paul Soucy Lead Assigning Editor Credit cards, credit scoring, personal finance Paul Soucy leads the credit cards content team at NerdWallet. He worked as an editor for the Des Moines Register, USA Today and Meredith/Better Homes and Gardens for over 20 years. He after which he established his own successful freelance editing and writing practice. He edited his work for the USA Today Weekly International Edition and received the highest award by ACES: The Society for Editing. He holds a bachelor’s degree in journalism as well as a Master of Business Administration.
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Cash was the most popular option. People paid for everyday purchases with cash or checks (which are functionally equivalent to cash) and kept credit cards in reserve for large, infrequent purchases — if they had credit cards at all. Today, credit cards are accepted almost everywhere, and some people never carry cash at all.
In general, NerdWallet suggests whenever it’s possible:
Credit cards are safer to carry than cash and offer stronger fraud protections than debit cards.
You can reap significant rewards , without having to change how you budget.
It’s easier to track your spending .
Responsible credit card use is among the easiest and fastest ways to build credit .
Utilizing credit cards . You can spend money the way usual, pay the balance in full each month, and you’ll reap all the benefits of credit cards while never having to pay any interest.
The top credit cards for 2023.
Cash back or 0% APR the transfer of balances — check out our Best-Of Awards for the top credit cards of the year.
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Credit cards are safer to carry and use
When you loose your wallet or are stolen, the cash you were carrying will probably be lost forever. If thieves are on a spending spree with your credit cards there is a chance that you won’t be held accountable for any fraud-related purchases. It might take a while to get rid of the mess, but you won’t lose any money.
Debit cards, too, pose a risk. If your credit card is used in a fraudulent manner, it’s the card issuer who loses the money. When your debit card is misused, . If you report the fraud promptly and report the fraud, you will get your money back -eventually. It could be a while until things are sorted out. In the meantime there is a chance that checks will bounce. automated payments could be rejected because of insufficient funds and you may have a hard time covering your expenses.
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Credit cards can earn rewards easily
Credit card rewards exist to make it easier for you to use your credit card, and are extremely persuasive. With a flat-rate credit card that offers the same amount on every purchase, you can get back 1.5 percent or even 2 percent of each dollar you spend as cash or points or miles to redeem to pay for travel or other purchases. Spend $1,000 a month and you can earn between $180 and $240 per year with no effort.
Other cards pay higher rewards in specific areas of spending, like food, gas, or dining out. Take a couple of cards, and you’ll amplify your rewards considerably.
For instance, let’s say a family has four popular cash-back credit cardsthe, the the and the . By strategically using them, the family could make hundreds of dollars each year in cash back:
Spending
Rewards rate
Annual rewards
Groceries
$400 / month
6%
$288
Restaurants
$150 a month
*5% over three months
* 3% for 9 months
$81
Gas
$100 / month
* 5% for six months
* 3.3% for six months
$48
Amazon.com
$100 per month
* 5percent for six months
* 2% for 6 months
$42
Streaming media
$50 / 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 a year in spending at U.S. supermarkets, then at 1% (terms apply — refer to ).
Restaurants
Three months in the Discover it(r) Cash Back program earns 5 percent cash back up to $1,500 per quarter for spending on categories you choose to activate, as well as 1% on other purchases. In 2020, restaurants were an area that earned 5% for one quarter.
For nine months, the Flex(sm) from Chase Flex(sm) earns cash back of 3% in restaurants.
Gas
Three months in a row: The Chase Freedom Flex(sm) earns you 5% cash back on the amount of $1,500 spent in quarterly categories that you activate. The year 2020 was the last time Chase had gas stations as a 5% category for three months.
In three consecutive months In 2020 the Discover it(r) Cash Back featured gas stations as the 5% category over three months.
For six months: 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 2020, Chase and Discover had Amazon.com as the 5% category three months at a time.
In the course of six months, Citi(r) Double Cash Card earns 2% cash back on all purchases . You earn 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 subscriptions (terms are applicable).
Travel
Chase Freedom Flex Chase Flex Flex(sm) earns 5 percent cash back on trips made through Chase.
Everything else
Utilize this Citi(r) Double Cash Card and earn cash back of 2.
An important note of warning, be sure to not spend more money than you would just to get additional rewards. The cash you earn won’t make up for that extra $100 you spend at the grocery store or that extra $250 worth of clothes. If you carry a balance from month to months, the interest you pay can more than eat up the amount you earn and you should pay it all in full whenever you can.
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Credit cards can help you monitor your spending
Maintaining a budget can be difficult no matter how much you spend it. However, finding out where money went is especially difficult. Misplace a receipt, and then there’s no evidence of what you spent and where the money went. Checks? Forget to enter one in your account for checks, and you’ll have be patient for your beneficiary to cash it before you can track it (and some people are known for keeping the checks over a period of months).
With credit cards, everything appears on your online account in close to real time. In addition some issuers automatically categorize transactions in accordance with the merchant:
Purchases on an Chase credit card are identified by categories.
The majority of major issuers allow you to generate reports to determine how much you’ve spent in different categories in a given month, or all year long or over a certain time that you define:
Report on spending for the Chase credit card.
If you’re using an app for budgeting, such as Mint and You Need a Budget, you can import the data from your credit card and bank accounts. It’s easy to place each purchase in a budget category and see where you’re overspending and areas where you could stand to splurge a little.
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Credit cards aid in building credit
There is no requirement to use credit cards to enjoy good credit, and certainly you don’t need to keep the balance. But careful usage of a credit card is the most effective way to increase your credit scores and opens up many possibilities. It can make it easy to get housing, whether a potential landlord is checking your credit prior to giving you keys or applying for a mortgage to purchase a house. Cell phone providers, insurance agents and utility companies also may use your credit score to determine your eligibility and even your rates. This can increase your chances of getting a job, as the majority of employers run credit checks on job applicants.
If you do have credit cards, using them for frequent small purchases and keeping your balances at a minimum and paying your bills on time will improve your credit score in the long run.
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When not to make use of a credit or debit card
When you’ll have to pay an additional cost Processing fees are charged by merchants every time you use credit card. Most times, these charges are included in the merchant’s prices, like any other expense of running a business. However, sometimes, a business may pass the processing cost to you directly by tacking on an upfront fee as well as a “convenience fee” to use cards with credit. In such cases, you’ll probably want to pay some other way in the event that your rewards from your credit card are sufficient to eliminate the surcharge.
If you don’t want to force the merchant to pay a fee: Similarly, you may be able to steer clear of using credit cards from smaller businesses you especially want to support. They may appreciate it when you pay with cash or by check, as they don’t have to cover processing charges. Debit cards are more advantageous than credit cards offered by the perspective of merchants, as processing fees for debit cards tend to be less than the amount they’d pay for a credit card transaction.
When you don’t want to spend too much: Some people struggle to keep their spending in check when they utilize a credit card. The five-figure limit on credit cards 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 worried about racking up an excessive credit card balance it’s possible to pull out your debit card or cash.
There are a lot of great benefits for credit card users. Do your research to find the one that is right for you. Be sure to spend wisely, whatever method of payment you decide to use.
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For rates and charges for the Blue Cash Preferred(r) Card by American Express , see .
The authors’ bios: Virginia C. McGuire is a former credit card writer 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 has an MBA.
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