Some benefits of using a credit card
If you’re responsible with your money, read on:
Credit cards are convenient: …According to CardWeb.com, about 4 million retailers accept credit cards in the U.S., and more than 21 million worldwide. Add to that countless online merchants (more than 70% of online transactions involve payment cards), and the convenience factor grows.
So there you have it: Convenient for you — and profitable for lenders. They take a cut from retailers who accept credit cards, so they are banking on the widespread convenience of plastic.
Use their technology to organize your spending. …Some cards categorize your purchases and send quarterly or annual summaries on your spending — including percentage breakdowns on what you spent at retail, dining, and dog-grooming merchants. Many let you track your spending online and review and print statements based on weekly, monthly, and yearly time periods, and even by category. You can even transfer the data directly into financial software like Quicken or Money.
If you’re good about paying your bill in full, and on time, every month, your credit card can be a powerful budgeting tool.
Your card can bolster your image in the eyes of a lender. Frankly, there’s no better measure of your creditworthiness than how you handle a credit card. It’s as simple as that. When a lender wants proof of your gold-hearted ways, he consults your credit history for a black-and-white snapshot of your ability to: a) be deemed creditworthy by other lenders, and b) pay your bills on time and avoid spending benders.
There’s a direct link to your creditworthiness and the amount of available credit you are given. While that doesn’t mean that you should go crazy and open a dozen MasterCard accounts, you should consider using credit to establish a firm borrowing history, especially if you are going to apply for a large line of credit — like a mortgage or car loan.
On the flip side, being a totally responsible user of credit by paying off your balance in full every month actually works against you! We find that alarming, but the truth is that while paying off what you borrow to the dime, every month, is noble — not to mention Foolish — an account that consistently reflects a $0 balance doesn’t prove that you can use credit responsibly.
It gives you a float on a loan. Most credit cards offer you a grace period (if yours doesn’t, dump it now). That means that if you have no balance on your card at the time of a purchase, you have anywhere from 20 to 30 days during which your lender will not charge you interest on your purchase. This is called the float, and it’s pretty standard on all cards. It’s a great breather for unexpected expenses — like paying for an airline ticket you hadn’t planned in your budget so you can attend your best friend’s last-minute elopement. It also saves you from paying interest on a purchase that you eventually return.
The float is a nice convenience, but don’t use it to get greedy. Some people use the grace period to game an already game-y system. But taking a cash advance from your card — even after you factor in fees and interest — to try to make a few bucks in an interest-bearing account is an accounting hassle that has too many opportunities to go wrong. And curses on those who use a low- or no-interest cash advance to invest in the stock market. Unless you have the super-power to determine the market’s every move, there’s no shorter path to financial ruin.
You can use their desperation to your advantage. Here’s a trick that Fools the world over have employed. What do you want your lender to do for you? Waive the annual fee? Lower your interest rate? Forgive a late fee? Call you on your birthday? All you have to do is ask. That’s right — just ask. The lending industry is so extremely competitive that it’s in your lender’s best interest to keep you from walking to one of his competitors. The cost of wooing a new customer ranges from $50 to $150 per account.
The ploy with the most impact is to play the “Top This Rate” game with your lender. If you are trying to pay down a balance on your credit card, a lower interest rate will enable you to do so much faster. Though it is not as easy as it once was, getting your lender to play ball and knock off fees or points from your interest rate can pay serious dividends in your favor.
Lean on their corporate might. When you make any purchase with a credit card, you’ve got someone — a big someone with a lot of corporate pull and possibly a baseball stadium named after them — on your side. When buying a high-priced item, putting it on your credit card gives you immediate purchase protection that you just don’t get when you pay with cash or an ATM card.
Most cards boast of their purchase protection program — saying they’ll replace an item you bought with your card if it is lost or stolen. (There are a lot of limitations, so make sure to check the fine print.) Some credit cards automatically extend your product warranty when you use it to pay for a purchase. And if the merchant doesn’t deliver on his promise to you, your lender can take up the fight on your behalf. After all, it’s ultimately their money on the line. Let them be the big heavy for you.
Let your lender play cops and robbers. If you’re the victim of theft, first call your mother to let her know that you’re OK. Then call your lender. Most credit cards are very responsive about working with customers to resolve theft issues. Fraud is one of the industry’s biggest money busters — card issuers lose about $1 billion each year to credit card fraud, according to CardWeb.com. Most lenders hold you liable for just the first $50 of a crook’s spending spree. (Many will even waive that amount if you ask kindly, between sobs.) With the growth of online account access, customers are able to spot fraud well before their next card statement arrives via snail mail.
If a thief manages to wrestle away your ATM card, which is directly linked to your checking or saving’s account, you may lose whatever money is in your account as the crooks charge and charge until your balance runs dry. Because of this quirk, a lot of banks have started implementing similar protection measures as offered by their credit card brethren. Just to be sure, check with your customer service reps before you leave home with a check card.
[From Fool.com
(Somewhat) Similar Posts:
Visa has a new type of credit card, called the contactless card, that sends the payment information through radio waves to the POS terminal, thus...Like most plastic these days, you can get rewards programs on your debit card at most banks. Banks like to incentivize their customers to...Just ask: About a third of credit-card users have pressed for a lower interest rate, according to a September survey by Synergistics Research Corp. More than...Receiving several credit card offers in the mail every week is definitely annoying, but it can also expose you to potential identity theft. There...