5 reasons to almost always pay with a credit card

If you’re able to pay off your credit card balance in full each month, it’s often a smart financial move to use one for nearly all your purchases. Here’s a look at five reasons why you should consider making your credit card your go-to payment method.

Reason #1: Cash back and rewards

If you qualify for a card that offers cash back or credit card rewards, those can be a valuable benefit. Cash back credit cards typically pay you back a percentage of the money that you spend on purchases. The Citi Custom Cash℠ Card, for example, allows you to earn 5% cash back on the first $500 spent in your top eligible spend category during every billing cycle (and 1% thereafter), which it automatically identifies from 10 popular categories. It delivers 1% cash back on all other purchases.

If you’re a business owner, the American Express Blue Business Cash™ Card lets you earn 2% cash back on all eligible purchases up to $50,000 per calendar year and 1% cash back on eligible purchases after that (terms apply). You can also earn up to a $250 statement credit after making $3,000 in purchases on the card within the first three months after you open it.

Rewards cards allow you to earn points that you can use for deals on merchandise or gift cards, or for airline miles you can put toward flights. Travel credit cards have reward programs designed to encourage cardholders to use their cards for trip planning. The Aer Lingus Visa Signature® Card, for example, pays 3 Avios, or Aer Lingus points, on every $1 on flight purchases using the card through Aer Lingus, British Airways, Iberia, and LEVEL. It also pays 2 Avios for every $1 spent on purchases directly with the hotel and 1 Avios per $1 spent on all other purchases.

Reason #2: Fraud protections

Credit cards are the payment method that offer the best protections for consumers. The Fair Credit Billing Act limits your liability for fraudulent charges on a credit card in your name to $50, but many card issuers provide $0 liability on unauthorized charges.

“Always use credit cards for online purchases,” advises Howard Dworkin, chairman of Debt.com. “If it ends up being an unsavory retailer or an outright scam, at least you’ll have some protection and an easier time with dispute resolution.”

The billing cycle on credit cards also gives you time to notice and dispute charges before they impact your finances. With debit cards, an unauthorized charge will automatically come out of your bank account—and even if your bank refunds you the money, you won’t have access to that cash until you’ve sorted it out.

Reason #3: Other perks

In addition to cash back and rewards, many credit cards provide additional perks to cardholders, such as access to airport lounges, extended warranties on purchases, and insurance for car rentals made with your card. The Capital One Platinum Credit Card, for example, provides cardholders access to exclusive restaurant reservations and culinary events as well as pre-sales on tickets and suite experiences at music, sports, and other events.

Reason #4: Credit building

When you use a credit card and pay it off regularly, the card issuer will report those on-time payments to the credit bureaus. Over time, that can improve your credit score and credit history, which demonstrates to future lenders that you’re a responsible borrower. That can make it easier (and less expensive) to get home or auto loans if you need them later.

Reason #5: Convenience

Using a credit card is often simply easier than carrying cash or writing a check for purchases. You can make purchases quickly and easily both online and in-person, without worrying about carrying around cash or finding an ATM. Contact-less, chip-enabled cards, such as the Citi Premier® Card, allow you to shop safely by just tapping your card against an in-store payment reader.

When you should skip the credit card

While the reasons above make a good case for using a credit card for most purchases, there are a few times that doing so may not be the smartest course. Some merchants, for example, charge a higher price for credit card purchases, so using a debit card or cash in those instances could save you money.

In addition, if you have trouble sticking to a budget or have a balance on your credit card that you don’t pay off every month, it may make sense to put the card on ice. That’s because the high interest rates on most credit cards negate most of the benefits. Instead, focus on paying down your debt first, then you can switch back using your credit cards and enjoy those rewards — interest-free.

“If you’re worried about having enough for your day-to-day expenses, a debit card or the envelope budgeting method is probably the way to go,” says Rebecca Stumpf, a spokesperson with Credit Summit.

Bottom line

As long as you don’t charge more than you can pay off each month, a credit card can be a great way to both protect your spending and earn rewards on things you’d be buying anyway. Spend some time researching the multitude of credit cards on the market to find one with perks that are the best match for your situation.

Article written by Beth Braverman for SFGATE Personal/Business Finance published May 24, 2023.