by Should You Use Your Credit Card for Everyday Purchases?
If you have a credit card that just sits in your wallet, reserved for occasional purchases, you may be missing out on some excellent benefits. Using credit cards for your everyday purchases not only helps you build credit and earn rewards but also provides additional benefits that cash or debit cards can’t match. However, credit cards also come with downsides, such as temptation to overspend, high interest charges and the chances of credit damage if used recklessly. Therefore, it is important to analyze your spending pattern, check eligibility and apply for the best credit card to make the most out of it.
To enjoy benefits while avoiding credit card debt or hurting your score, you need to be strategic in your spending by maintaining good credit habits. Here’s what you need to know:
Convenience and Easy Expense Tracking
Using a credit card can make your everyday expenses more convenient and hassle-free. Whether you’re paying for groceries, dining out or shopping, a credit card can be a quick and hassle-free payment method. You can simply swipe, tap, or insert your card to make any transaction. Additionally, it also simplifies expense tracking. Credit card issuers send you monthly statements that show all of your monthly transactions, making it easier to track spending than if you use cash.
Value Back through Rewards or Cashback
One of the main reasons to use a credit card for everyday purchases is to earn value back on all small and big payments that you make. The value back can be offered through cashback to rewards or travel miles, depending on the card. You can choose from cashback credit cards or general rewards credit cards as per your lifestyle. By using your credit card for everyday expenses, you can earn significant rewards that can be used to pay for future purchases, to fund your travels by converting into air miles or to get gift vouchers from your favorite brands.
Helps You Build Credit
Using a credit card responsibly can help you build a positive credit history. Making timely payments and keeping your credit utilization low positively affect your credit history. If you want to improve or build your credit score, one of the easiest ways to do so is to use your credit card for everyday expenses and responsibly pay off your card bill every month. A good credit score can make it easier to get approved for credit cards or loans at a lower interest rate in the future.
Bonus Rewards & Additional Perks
Beyond rewards and credit-building potential, credit cards often come with additional benefits that can enhance your lifestyle. These benefits can include complimentary memberships, travel insurance, free vouchers or complimentary access to airport lounges across the globe. Besides these benefits, some credit cards even provide decent welcome benefits through which you earn bonus vouchers or rewards and redeem them for travel, dining, cash or everyday purchases.
How Using Your Credit Card for Everyday Expenses Might Harm You?
Using your card for everyday expenses can help you earn loads of benefits, but they also come with their share of risks. Here are some of the things that you should watch out for while using your credit card regularly:
Temptation to Overspend
One of the primary benefits of using a credit card is that it allows you to make purchases without having to pay for them immediately. However, this benefit can also be a drawback, as it can make it easy to spend more than you can afford. This often leads to debt and financial instability over time. To avoid overspending, it is important to create a monthly budget for your expenses and stick to it.
High Interest Rate & Charges
Credit cards often come with high-interest rates, especially if you don’t pay off your balance every month. The interest rate on a credit card can be pretty high, often ranging from 11% p.a. to 45% p.a., or even more, based on the card. In addition to this, credit card issuers often charge additional fees, such as late payment fee, cash advance fee and annual fee. Collectively, these fees can be high and can add up quickly if you are not careful about your credit card usage. To avoid paying interest & other charges, it is advisable to pay off your credit card balance in full every month.
Risk of Credit Damage
While using your credit card responsibly can boost your credit score, misuse can definitely damage it. Late payments and carrying your balances every month can harm your credit score. Additionally, if you frequently max out your credit card limit, it shows that you may be at risk of defaulting on your payments. A higher CUR and default payments can negatively impact your credit score and affect your eligibility to qualify for loans or credit cards in the future. To avoid the risk of credit damage, you need to use your credit card responsibly by paying your bills on time and keeping your CUR low.
The final decision to use your credit card for everyday purchases totally depends on your financial discipline, lifestyle and circumstances. If you can responsibly manage your spending and pay off your balances regularly, credit cards can be a great way to save on your everyday expenses while availing benefits like rewards, discounts and additional perks. However, if you find it difficult to avoid overspending or have a history of credit card debt, it is advisable to limit your credit card use for necessary purchases.
