8 Advantages of Credit Cards: Reasons to Use a Credit Card

Q: Should I get a credit card?

Credit cards are powerful financial tools, but they aren’t for everyone. If you can manage a credit card responsibly, you may benefit from having a credit card. But if having a credit card causes you to incur significant debt or you make late payments, it may not be the best form of payment for you.

Q: How do I choose a credit card?

If you’re looking to understand how to choose a credit card, you should know that there are about a dozen major banks and hundreds of national, regional, and local banks and credit unions that issue credit cards. You should choose a card that best meets your needs. For example, credit card users who carry a balance will want a card with a low standard interest rate. Those who avoid interest by paying their balance in full could benefit from a card that offers rewards in the form of reward points, frequent flier miles, or cash back. It’s also important to understand the card’s annual fee, interest rate, and other credit card terms.

Q: How long does it take to get a credit card?

It takes just a few minutes to apply for a new credit card. Once approved, you’ll likely receive your new card within seven to 10 business days.

Q: Can I pay off my credit card debt early?

Yes, credit card issuers are happy to receive payments for your charges as soon as you send them in. Plus, you can save money on interest by paying off your debts sooner rather than later.

Q: Will I be charged if I withdraw cash on my credit card?

Making cash withdrawals using a credit card can be expensive. Most credit cards will charge a cash advance fee, as well as a higher cash advance interest rate. Also, there is no grace period for cash advances, so you’ll always incur interest charges. Additionally, you could incur fees from the ATM where you withdraw cash, and a foreign transaction fee may apply if you make cash withdrawal outside of the United States.

8 Advantages of Credit Cards - Reasons to Use One

Jason SteeleUpdated June 21, 2024

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

Credit cards are one of the most popular payment methods in the U.S., and there are some good reasons for that. For starters, credit cards offer a revolving line of credit that allows you to finance purchases. They’re also a secure and convenient method of payment.Beyond these two essential characteristics, credit cards can also offer a long list of rewards and benefits. Here are eight advantages of credit cards.

8 Advantages of Credit Cards

1. One-Time Bonuses

The credit card industry is competitive, and one of the credit card benefits that card issuers use to attract new customers is new account bonuses. These one-time bonuses can come in the form of cash back, travel rewards points, or airline miles. However, most of these offers require the cardholder to spend a minimum amount within a certain time frame in order to receive the bonus, which is something to keep in mind when choosing a credit card. For example, an airline credit card might offer new accounts 50,000 miles after charging $3,000 to card within three months of account opening. But when the cardholder can meet the credit card requirements to earn these one-time bonuses, they can be a huge incentive to apply for a new credit card.

2. Cash Back

Many credit cards offer valuable cash back rewards for spending. For instance, there are now several credit cards that feature 2% cash back on all purchases with no limits. Other cash back credit cards feature bonus offers on common purchases such as gas, groceries, and travel that can range from 3% to 6% of the amount spent. However, cards that offer the most generous cash back amounts will usually limit the amount of annual purchases that qualify for additional rewards. Also, keep in mind that credit cards that offer rewards like cash back will often have a higher standard interest rate than cards that don’t offer these rewards (for reference, here’s a primer on how to calculate credit card interest to see if the rewards are worth the tradeoff).

3. Reward Points

Like cash back rewards, there are many credit cards available that offer reward points or miles. For instance, some Chase credit cards offer Ultimate Rewards points that cardholders can redeem for cash back, gift cards, and travel reservations, or transfer to airline and hotel partners. There are also many credit cards that are co-branded with airlines and hotels that offer reward points towards flights and hotel night stays.

4. Safety

One of the key advantages of using a credit card is that it’s one of the safest forms of payment available. This is because the Fair Credit Billing Act of 1974 features robust consumer protections against fraud and billing errors. By law, credit card users are only liable for $50 in the event of fraud, but in practice, major credit card payment networks generally have a zero-dollar liability policy, which means you’re never liable.

5. Interest-Free Grace Period

Nearly every credit card offers an interest-free grace period, which is a major perk of credit cards. This grace period is the time between when your statement closes and when payment is due. The payment due date is typically 21 or 25 days after the statement closing date, though you can find out your exact due date by reading a credit card statement. Because of how credit cards work, if you pay off your entire statement balance by the payment due date, then your interest charges are waived.

6. Insurance

Many credit cards offer valuable travel insurance benefits. The most commonly used benefit is rental car insurance. This enables you to decline the expensive, optional insurance sold by rental car companies. Other kinds of travel insurance offered may include policies that cover baggage loss or damage, trip cancellation, and trip interruption. Credit cards can also offer purchase protection, extended warranty, and return protection insurance.

7. Universal Acceptance

One of the advantages of credit cards is their nearly universal acceptance. Major credit cards like Visa and Mastercard are accepted by millions of merchants around the world. On the other hand, cash must always be exchanged to the local currency, and electronic payments are still far from being universally accepted.

8. Credit Building

Among the many credit card advantages that exist, perhaps one of the most notable is the ability to build your credit. Each month, credit card issuers report your balance and payment information to the major consumer credit bureaus. With on-time payments and a low credit utilization rate (an important credit card term to know), you can grow your credit history and raise your credit score. Having a higher credit score will help you qualify for other loans with low interest rates and more favorable terms.

The Takeaway

Credit cards can serve as a powerful financial tool given the numerous credit card benefits available. The advantages of credit cards range from the ability to earn bonuses, cash back, and rewards points, to their interest-free grace period, safety as a payment method, and path towards building credit. However, credit cards can also harm your finances and credit score if you don’t use them responsibly.A big part of ensuring responsible credit card use is finding a credit card that suits your needs and lifestyle. Lantern by SoFi makes it easy to compare credit cards so you can see all of the options that may be available to you.

Frequently Asked Questions

Should I get a credit card?

How do I choose a credit card?

How long does it take to get a credit card?

Can I pay off my credit card debt early?

Will I be charged if I withdraw cash on my credit card?

Photo credit: iStock/Maca and Naca

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About the Author

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.

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