Why use a credit card

Here are 6 reasons why people use credit cards to purchase items.

1. To help build savings

By avoiding transactional bank account fees and keeping money in a high interest bank account longer (until the credit card due date).

2. As an interest-free loan

What’s important here is that you understand the ‘loan terms’. That is, when do you have to pay the money back and what will happen if you don’t? Generally if you pay your credit card off in full each month, and your credit card has interest free days, you will avoid paying interest.

3. To help monitor spend

Credit card transaction records can be very specific and can be used to itemise where you are spending money. This can help you to build a budget and look for areas of saving.

4. To benefit from rewards programs

By using a credit card to purchase items you would purchase anyway (and pay off without paying interest or late fees) you can benefit from rewards programs offered with some credit cards.

5. To build a strong credit rating

By paying off your credit card on time you will be building a positive credit rating. This can help you when it comes time to taking out bigger loans such as a car loan or home loan.

6. Pay off your home loan sooner

By leaving funds in your offset account longer (until the credit card repayment due date) you will be reducing the amount you are paying interest on, which means you’ll be paying more off the principal.