During my time spent managing my own credit, and here as Mr. Credit Card, I have learned many things about credit cards, and credit scores.

I know that if you manage your credit responsibly, then your credit cards can be a valuable tool in your financial arsenal.

Many people who hate credit cards believe that they do not make financial sense. I believe that if you pay your cards off every month, using them makes perfect financial sense! Used responsibly, credit cards give you all of the following things:

• You Can Earn Reward Points – I have used reward points in the past for airline tickets, companion tickets, and other merchandise. Since I pay the balances on my card off monthly, I do not get charged interest and get free rewards instead. Donna Freedman, at the MSN Money Blog, also uses her credit cards because she likes the rewards. However, she cautions strongly against the spend,spend,spend mentality that can often come with having a credit card.
• You Can Get Cash Rebates – I currently use the Blue Cash credit card from American Express. I get 5% cash rebates on my supermarket, gasoline and drugstore purchases. In a year’s time, that really adds up. You just can’t beat cash back, and I’m not alone in that opinion: Sun, at The Sun’s Financial Diary frequently talks about the benefits of using credit to get cash back rewards.
• You Can Pay Your Bills Automatically – If you put your recurring expenses like utility bills and subscription services onto your credit cards, then you never have to worry about your bills being past due. They get paid automatically, and I earn points and rebates for things that I would have had to pay for anyway. Then I can sit down at the end of the month and make one payment. It saves me time, and money. J.D. Roth at Get Rich Slowly pays his utility bills with his credit cards – and earns 1% cash back each month.
  

• You Can Build And Maintain An Excellent Credit History - Because I use my credit cards responsibly, I have an excellent credit score. When I apply for loans, I am able to get them at excellent interest rates. Over my lifetime, this will save me thousands of dollars in interest payments on my mortgage, vehicles and anything else I may want to take out a loan for.

Personal Finance Blogger Brip Blap, isn’t joyously pro-credit card, but he does advocate their responsible use – and acknowledges that credit cards per se aren’t bad; it’s the mis-use of them that’s bad.

• You Credit Cards Can Be An Emergency Credit Line – Nothing replaces a cash emergency fund, but knowing that my cards are there if I need them gives me peace of mind. Having that emergency line of credit provides extra security for my family and I because, let’s face it, it’s a lot easier to get a loan when you don’t need one, than when you do!
• Your Credit Cards Give You The Ability To Dispute Charges – If you are at the grocery store, or the mall, and the clerk makes a mistake what do you do? If you paid cash you have to find the receipt, get back in the car, drive all the way back to the store, wait in line, and hope they refund you the difference. With a credit card it’s a very simple procedure to dispute the extra charge. You can get your money back without wasting time or even leaving your house.Trent at The Simple Dollar lists consumer protection as one of the many reasons he employs credit cards in his overall financial plain – with the caveat that if you can’t handle your cards, don’t even try it!
  

• Credit Cards Give You Access To Exclusive Discounts – Many credit card companies give you discounts when you shop with affiliated businesses. You can save anywhere between 5% and 40% off of your purchases. If you use a rewards card, you can earn rebates or reward points on top of that.

Madison over at My Dollar Plan loves getting those discounts and earning money from credit card offers too- so much so that the Dupaix family has 89 different credit accounts, and the capability of borrowing just over $1,000,000. That pretty much smashes the theory that having too many credit accounts hurts your score, doesn’t it?

• Credit Cards Can Be Used As Interest Free Loans – As long as you pay your balance in full each month, then you are not charged interest on the money you borrow. Again, combined with rebate and reward points, then it’s like being paid to use the card.
• Credit Cards Give You The Ability To Ask For Fee Removals, Lower Interest, and Increased Lines of Credit – On any other types of loans, you can’t just call up the lending company and request to re-negotiate the terms. At the very least, it’s going to involve a lot of paperwork. With credit cards, all you have to do is make a phone call, or jump online. Besides, the better you handle your credit, the better the terms you are eligible for. This means that even if you start with a lower credit score, you can periodically call your credit card companies up, and see what they can do for you. Silicon Valley Blogger at The Digerati life loves credit cards too! She did a post titled “9 Reasons Why I Love My Credit Card” and included fee removals and customer service as some of the reasons.
• Credit Cards Offer You An Extended Layer of Identity Theft Protection – If your bank account information is stolen, you are liable for every charge the thief makes between the time they steal your information, and the time you report the theft to your bank. With credit cards, you maximum liability is $50. Visa even waives the fifty dollars and offers zero liability. Some credit card companies go a step above, offering identity theft insurance as part of the credit package.

  

• Credit Cards Have Concierge Features – I use my American Express Platinum to book restaurants, or plane tickets. This is one of the perks that many reward card holders rarely use, possibly because they forget about them, or don’t realize they have them. Be sure to check your credit card’s policy to see if you are missing out.
• Credit Cards Offer Roadside Assistance – Last time I locked my keys in my car I used American Express’ “Global Assist” feature. They had my car unlocked, and my keys returned to me in about an hour and a half – free of charge.
• Credit Cards Have Purchase Protection Features – My Blue Cash Credit Card from American Express has a specific purchase protection feature. I can return any purchase within 90 days, even if it was accidentally damaged. It would be nice if all stores offered that kind of guarantee, wouldn’t it? This is one of my favorite credit card benefits, and I’m not alone. Liz Pulliam Weston at MSN Money agrees. She did an article titled “9 Reasons to Love Credit Cards“, and counts purchase protection and rental car insurance among the reasons she loves her cards.
• Many Credit Cards Offer Automatic Extended Warranty Plans – Why pay several hundred dollars at the store just to buy an additional warranty? Many credit cards will double the manufacturer’s warranty, or offer an additional year or so of protection – at no additional cost.
• Credit Cards Offer Baggage Insurance – If you’ve ever taken a flight and had your luggage end up in a different city (or worse, never be located at all) then you can appreciate automatic baggage insurance. I can attest to the usefulness of this one myself. When I lost my luggage at an airport, I received a lump sum of cash for it, and it really helped out.
• Credit Cards Give You A Written Record of What You Purchased Each Month – If you goal is to be frugal, then having a complete, written account of nearly everything you purchased in a month is extremely useful. It can show you where your budget works, and where it doesn’t. It takes a lot less time to sit down and go through a neatly organized statement than it does to sort and categorize an envelope full of receipts. Ben over at Money Smart Life uses his credit cards this way because it saves him a lot of time each month when he reviews his purchases.

So, I’ve given you many of the reasons why I believe credit cards are excellent financial tools, what do you think? Give us the reasons why you love, (or hate) credit cards in the comments section below.

Also, as you saw above, many of the other personal finance bloggers around the ‘net agree with me that credit cards are great financial tools. However, there are a few of my favorite bloggers who have not yet weighed in on the issue!

I would enthusiastically like to tag the following bloggers, and invite them to tell us on their own blogs whether or not they believe credit cards are good, or bad financial tools.

• Mrs. Micah – Now that you’ve gotten into the credit game with your first credit card, what do you think?
• Frugal Dad - We’ve Read Your Articles on How to Get Out of Credit Card Debt, and Stay Out, and Credit Cards Target College Students on Campus, but what do you think about regularly using credit cards as a financial tool?
• Money Ning – You have lots of excellent posts on handling credit responsibly. But how do you feel about using credit cards as a financial tool?

If you choose to write a response, please be sure to tag three others, and see what they think!

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This entry was posted on Thursday, September 11th, 2008 at 09:45 and is filed under Reader's FAQ. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.