The traditional advice is that you should always use your debit card when you can. Credit cards have an interest rate that rises in proportion to the duration of your debt. With debit cards, you’re withdrawing from your bank account, and so, you don’t have to worry about any extra charges. But then, did you know that in many situations, it’s actually more economical for you to use your credit card?
In this post, we’ll be discussing three unpopular reasons why you should use alternative payment options like your credit card more often.
Bonuses and incentives
Many credit card providers give incentives and bonuses to customers for using their credit cards. Unlike credit cards, debit cards don’t come with any rewards or incentives. Some providers give points on every dollar spent in stores. You can then redeem the points for in-store purchases and hard cash. Some providers also offer lower interest rates on your card payments.
Besides credit card providers, some supermarkets offer rewards for using their branded credit cards as well. Some of the rewards include store credit, lower interests, and redeemable points.
A higher credit score
Credit scores give lending organizations an overview of your financial state and credibility. The lower your credit score, the harder it will be for you to access facilities like loans and higher credit limits. You can gradually build your credit score by actively using your credit card and paying it off.
The important thing to remember is that you have to meet your monthly payments. If you don’t, your credit score will actually go down, which hurts your financial outlook. When you meet your monthly payments, you’ll be able to get higher credit limits. A higher limit can come in handy if you ever find yourself in a situation that you need instant cash.
Cashback rewards are some of the most powerful incentives offered by credit card providers. If you meet up with your monthly payments, your provider will probably offer you cashback rewards for your loyalty and patronage. These are several ways to redeem cashback rewards:
- Bank deposits: This is when the amount is deposited directly into your bank account. There’s usually a minimum balance that you must meet before you can receive a bank deposit.
- Balance reduction: You can also choose to have the cashback reward credited to your card’s balance. That basically reduces your debt.
- Gift cards: Many providers also offer gift cards as rewards.
- Charity donations
The percentage of your cashback varies, depending on your card provider and the products and services you purchased. For example, vendors offer different rates on gas stations from elsewhere.
The bottom line
Using your credit card more frequently than your debit card can actually do a lot for your finances. However, to really enjoy it, you need to ensure that you don’t spend more than you can comfortably pay back, or else, you could be exposing yourself to debt and unfavorable interest rates.