This article highlights several major benefits of credit cards
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Cash Back and Points on Purchases
Most U.S. credit cards offer cash back on spending, which means you earn a little reward from the bank while you shop. Don’t underestimate that 1%-5% cash back—small amounts add up quickly. And if you use a debit card or a card from back home, you miss out on these rewards entirely. Here are a few examples of cash back categories:
- 1% cash back on all purchases
- 5% cash back at supermarkets
- 5% cash back on all online shopping
- 5% cash back at gas stations
Suppose in one month you spend $500 at supermarkets, $100 on gas, $200 shopping online, and $500 on other purchases. In total, you could earn:
500*5%+100*5%+200*5%+500*1%=$45
That means you simply spent as usual, but still earned an extra $45 through your credit card. Sounds like a good excuse to go out for a nice meal, right?
As for points, some credit cards offer tens of thousands of points as a sign-up bonus. With 1W points, you can redeem a round-trip domestic ticket within the U.S.; with 3.5W points, you can redeem a one-way ticket between China and the U.S. Why not take advantage of that?
Buy Now, Pay Later
For many Americans, it is perfectly normal to make purchases first and then pay the bill when the next paycheck arrives. So when money is tight, using a credit card lets you push this month’s spending into next month’s payment cycle. In other words, the bank fronts the money so you can enjoy the purchase now. Why not use that flexibility?
- For example, if you help people in China buy products and ship them internationally, delivery often takes about a month. Paying with a credit card can provide a great cash-flow buffer. It is essentially like borrowing money from the bank interest-free to run your own business.
Credit Card Protections
Fraud protection: You may have heard stories of stolen credit card charges where banks and merchants keep passing responsibility back and forth, forcing the customer to spend a lot of time resolving the problem. In the more mature North American credit card market, however, nearly all banks take responsibility for fraudulent charges. That’s right—once a cardholder confirms that a transaction was not authorized by them, the bank generally determines that the cardholder is not responsible. The bank handles the investigation from there. All you need to do is use the replacement card the bank sends you.
- My credit card was once used fraudulently at Target for $900. After one phone call to the bank, they immediately mailed me a new card and removed the charge. I barely had to do anything.
Purchase protection: What if an item you bought does not match the seller’s description? What if an online merchant never ships your purchase and refuses to refund you? What if something you bought gets stolen just a few days later? If you used a credit card, the credit card company can step in and coordinate with the merchant, and in many cases you will get a satisfactory resolution.
- I once bought several gas gift cards on groupon, but the merchant refused to ship them. I called the credit card company, they investigated right away, and later reversed the charge.
- Someone I know bought a phone with a credit card, and it was stolen at the mall. After submitting the police report to the credit card company, the cost of the phone was reimbursed.
It may sound surprising, but these are real protections that credit card companies provide to shoppers, making purchases feel more secure. In return, consumers are more willing to use those cards, and the card issuers earn swipe fees from merchants. In this kind of healthy cycle, consumer rights are protected almost invisibly.
Improve Your Credit Score
Applying for a credit card and paying on time can help improve your credit score. In the U.S., where credit plays a central role, that can bring many benefits and conveniences.
- Higher loan limits and lower interest rates
- Better approval odds for more rewarding credit cards
Saving 1% on a loan interest rate can mean a lot of money, so applying for a credit card early and starting to build credit is very important.
Extra Perks and Services
Some credit cards offer unique benefits to cardholders, such as:
- One free checked bag on domestic flights and priority boarding
- Free airport VIP lounge access
- Free towing service if your car breaks down
- Help booking hard-to-get restaurant reservations
- Free hotel suite upgrades
These may sound like benefits only wealthy people get to enjoy, but with the right credit card, you may be able to have them too.
Conclusion: By now, you might be thinking, yes, having a credit card really is a pretty good thing~