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Personal finance professionals spend a lot of time and energy trying to prevent people from using their credit cards – and this is with good reason. Most individuals use CCs irresponsibly and end up stuck in a debt trap. But contrary to popular belief, if people can use their plastic responsibly, they are much better off paying using their CCs than their debit cards and keeping transactions using their hard-earned cash to a minimum. Let us take a closer look at why this trusty plastic comes out on top and some CC strategies and uses to exploit.
There is nothing like the first bonus opportunity when getting a new credit card. Usually, applicants with good or excellent credit can get approved for CCs that offer various bonuses (usually worth $100 or more) in exchange for spending a particular amount (from $500 upwards) in the first couple of months the account is open.
Some plastics entice people, with miles or bonus reward points that can be redeemed for gift cards, statement credits, travel, or checks. In contrast, standard plastics that come with bank checking accounts usually offer initial bonuses or ongoing opportunities to get rewards from partner companies.
What are checking accounts? Click this site for more info.
Cashback plastics were first used in the United States. The idea was pretty simple: use it and get one percent of the purchase rebated through cash backs. Today, the concept has matured and grown. Now, some CCs offer two to three percent or as much as six percent cash backs on selected products, although these lucrative offers involve annual or quarterly spending caps.
The best cashback plastics are those that charge minimal interest and fees while offering high reward rates. Some CCs offer a high two percent rate of CB rewards on all spending, but users need to deposit their cash directly into investment accounts.
CCs are set up to allow users to earn points per dollar spent. Some rewards provide bonus points for particular categories of spending such as gasoline, groceries, or restaurants. When certain earning thresholds are reached, certain points can be redeemed for gift cards from restaurants and retailers, travel, or products through the CC Company’s online rewards platform.
These reward options are almost unlimited. Users can get a co-branded card offered in partnership with hotel chains, clothing retailers, or nonprofit organizations like the American Association of Retired Persons or AARP. Users can leverage their everyday spending to earn rewards every day. The trick is to find a plastic that best fits the user’s spending patterns.
Altering the person’s spending patterns to fit with a certain CC can be counterproductive. But if the user is already spending money regularly with a particular retailer or spending a lot of time in a particular hotel, why not use CCs that will encourage their continued patronage by offering enhanced rewards, perks, and discounts?
This perk precedes almost all the perks mentioned above. In the early 80s, Airline companies started offering their customers a way to earn frequent-flyer miles as a bonus, even when they were not flying, by forming partnerships with card companies and banks. Now, all international and domestic airline companies have at least one CC offered, with the same partnerships, by major plastic issuers.
Cardholders usually earn miles at a one-mile-per-dollar rate in net purchases, sometimes one dollar per two dollars for lower-end CCs that have a zero-yearly fee. How valuable this thing is will depend on the kind of airline ticket people will buy with their miles or points.
A lot of frequent flyers’ plastics are made more valuable by their mileage-based bonuses. These are usually enough to put users fifty to one hundred percent of the way towards award flights after meeting the credit’s initial spending requirements.
How frequent flyer miles work? Visit https://lifehacker.com/a-beginners-guide-to-airline-miles-1592887319 to find out more.
Paying with this thing makes it a lot easier to avoid serious losses from fraudulent activities. When debit cards are used by thieves, the funds are missing from the person’s account immediately. Legitimate expenses for which people have scheduled digital payments or mailed bank checks may bounce, triggering inadequate fund fees and affecting people’s credits. Even if it is not the holder’s fault, these missed or late payments can lower their credit scores. It will take a lot of time for illegal transactions to be reversed and funds restored to the account while banks investigate.
By contrast, when the CC is used in fraudulent activities, people are not out of any money – they just need to notify their service provider of the fraudulent activity and not pay for the transactions they did not make while the company resolves the issue. Networks like Mastercard and Visa provide zero liability coverage for fraudulent or unauthorized purchases as a way to entice usage of their product over checks or cash.
Keeping sellers honest
Say people hire tile setters to set the flooring in their entryway. Workers spend days measuring, cutting, grouting, placing tiles and spacers, as well as letting it set. They will charge property owners $5,000 for their services. Property owners can draw on their savings accounts and will write a check. But what will they do when after three days, the grout still has not been set, and the tile starts to shift?
The floor is now messed up, and the vein in the homeowner’s head will not stop throbbing because of stress. Individuals can take up this problem with the state licensing board in their area, but the procedure could take weeks, even months, and contractors still have their money.
That is why people should pay for big-ticket purchases like this using plastics if they can. The issuer has a reason to discourage fraudulent activities among vendors. More importantly, if property owner’s dispute charges, issuers can withhold the fund from the contractor, and not only will people get their funds back, they might even get help finding reputable contractors to do the job again.
When individuals make debit purchases, the money is gone immediately. When they make CC purchases, their funds remain in their checking account until they pay their bill. Hanging on to these funds for the additional time can be pretty helpful in two ways.
First, the value of money. It will save users tons of money in the process. Delaying payments will make the purchase cheaper compared to its actual price. Beyond that, by paying with credits versus checks, cash, and debit, people’s cash will spend a lot of time in their bank accounts.
And if they pay their CCs from interest-bearing checking accounts, they will earn money during the grace period. The additional cash will eventually add up to meaningful amounts. Second, when individuals consistently pay with their plastic money, they do not need to regularly watch the balance on their bank accounts.
Most of these things automatically come with tons of consumer protection protocols that individuals do not even realize they have, like car rental insurance (although usually second only to personal car insurance), product warranties, and travel insurance that may exceed the warranty that manufacturers provide.
Some or alle Norske kredittkort purchases are pretty hard to make using debit. When people want to rent a vehicle or stay in hotel rooms, they will usually have an easier time if they have CCs. Hotels and rental car firms want consumers to pay with these things since it makes it a lot easier to charge people for damages they cause to the car or hotel room.
Another good reason is that, unless people have prepaid for their hotel stays or rentals, merchants do not know the total amount of their transactions. Therefore, merchants need to black out the amounts of the user’s available credit line to help them protect themselves from possible charges they did not anticipate.
So if individuals want to pay for one item using debit, the firm may insist on putting a hold on hundreds or thousands of dollars on their accounts. Not only that, when people are traveling in foreign countries, sellers will not always accept people’s debit – even when it has major bank logos on it.
If individuals have no credit line or are trying to improve their scores, using these things responsibly will help because service providers will report people’s payment activity to the credit bureaus. But debit use does not appear anywhere on these reports, so it cannot help individuals improve or build people’s credit. Even if they need to deposit some money to get secured CCs, it can help them build their history and eventually qualify for larger debentures or unsecured ones.
These things are best enjoyed by disciplined people, who can remain conscious of their ability to pay the monthly bill in full or before due dates. Suppose individuals already know how to use it responsibly. In that case, they need to shift as many of their purchases as possible to their cards and should not use it for anything other than Automated Teller Machine access. If they do, the combination of buyer protection, the value of cash-in-hand, and the rewards will put users ahead of those who pay using their debit, cash, or check.