5 Reasons Why Credit Cards Make Sense

By Odysseas Papadimitriou, CEO of Card Hub, the Arlington-based leading credit card comparison website

Spring is in the air, and not only does that mean increased traffic on the Mount Vernon Trail, taking back the park with the Nationals, and Cherry Blossoms, but people will also be intent on taking care of their dreaded spring cleaning duties, which for many includes paying down debt and figuring out how to spend those tax refund checks soon to be burning holes in their pockets.  But will they use credit cards to do so, or are such products no longer useful?

Many people have become disillusioned with credit cards over the years, thanks in large part to the bait-and-switch tactics employed by unscrupulous issuers prior to and during the Great Recession, their reputation as conduits to debt, and myths about debit cards providing superior fraud protection.  While much of the derision aimed at credit cards is deserved and they certainly can lead to overspending if you aren’t the most financially disciplined person in the world, the benefits of credit card use will in most cases outweigh the drawbacks, especially in the new, more consumer-friendly environment.

Don’t believe it? Here are five reasons to use a credit card:

1.       No More Bait-and-Switch

As alluded to above, credit card companies are forced to play by a set of more consumer-friendly rules these days.  The rules stem from the CARD Act of 2009, a piece of personal finance reform legislation that did away with the random APR changes, unfair payment allocation, out-of-whack penalty fees, and other shady tactics that once served as the bane of a credit card user’s existence.  All in all, these changes have made it so that responsible credit card use is no longer punished, as was too often the case before.

2.       Free Money

How else can you get hundreds of dollars in free money out of your normal spending habits?  Rewards credit cards not only offer the potential for earning free flights, hotel stays and cash back from your everyday spending, but with banks intent on attracting low credit-risk customers following the recession, they have also been offering extremely lucrative initial rewards bonuses.  For example, one of the best such offers currently available is the Chase Sapphire Preferred Card, which provides $625 toward airfare and hotel stays or $500 cash if you spend $3,000 within the first three months.

3.       Lower Interest Costs

Not only can credit cards obviously give, but they can also take away – debt, that is.  The right balance transfer credit card will generally be able to provide over a year of 0% interest, allowing you to direct your entire monthly payment to principal reduction.  The benefit of such cards is only magnified when 0% cards also come with no balance transfer fees, as is the case with the No Balance Transfer Fee Slate Card from Chase.

4.       Cheap Currency Conversion

According to Card Hub’s Currency Conversion Study, card networks like Visa and MasterCard offer exchange rates that are roughly 8% lower than those provided by cash conversion services at local banks and nearly 15% lower than those at airport kiosks.  Using a Visa or MasterCard credit card is therefore your ticket to a cheaper overseas adventure; just make sure that you get a credit card without foreign transaction fees.

5.       Fringe Benefits & Rental Car Insurance

Both card networks and issuers typically provide a number of standard perks to their customers.  Depending on the card, these could range from price protection (i.e. if you find a lower price for a recently purchased good, you get the difference back) to a 24/7 concierge to roadside dispatch in case you get in an accident or run out of gas.  One of the most common such benefits is rental car insurance.  Most, if not all, credit cards give you a complimentary Auto Rental Collision Damage Waiver, which protects you from liability for collision or theft associated with your rental car.

While the above list is by no means exhaustive, it should provide a good sense of why credit cards are still extremely useful.  Just make sure to be responsible and your wallet will no doubt thank you!