Consumer Comeback Blog

Four Reasons People Give For Owning A Credit Card

Close up of a credit card faceAccording to recent studies, over 70% of American families own a credit card. Many people have credit cards for different reasons. Some reasons are better than others. Not everyone needs a credit card. Obviously millions of American citizens choose to go without them. But, understanding the underlying reasons for having credit cards in the first place will enable you to realize why you are using them, why you may be getting into trouble with them, and how to better put them to work in your favor.

The Reasons Tell Ourselves We Use Credit Cards…

1. It Is Easy. Credit cards provide a level of convenience to people who do not want to carry cash with them everywhere they go. I rarely carry cash anymore. I either use my American Express cards for the rewards points or pay with my debt card.

2. Rewards. More and more Americans are choosing the credit cards they carry based on the rewards program of that particular credit card. Many offer cash back, frequent flyer miles, or even just a point system such as the American Express. My wife and I try to put most of our monthly purchases on our American Express card to earn the reward points, and we then redeem those points for gift cards that we give away as Christmas gifts to our friends and family every year.

3. Warranties. Many credit cards offer additional warranties or protection on consumer purchases. Some credit cards even offer security when you rent a car with that card covering you with its own insurance allowing you the option of not having to take the additional insurance at the rental car counter which can be a huge savings. I personally love how strict some credit cards are with merchants. If you feel like you have been taken advantage of in some way by a merchant when you bought a product and used your credit card, many card companies will take up your dispute for you with the merchant when you have exhausted all of your other options. The credit card companies have far more resources than the average person in this regard.

4. Establishing Credit. Unfortunately, we live in a world built around borrowing money. There are not too many people paying cash for a house these days. So, in order to receive a mortgage from a bank, you of course have to have a credit history. Credit cards can be used to establish and build that history. If used properly, they can help prove to the banks that you are a good credit risk and should be granted larger loans for the items that we really need such as a home or car.

Do not misunderstand me. I am not saying that people should just own a credit card for the sake of owning one. But, when you understand the underlying rational that people have for owning them, it will make you a more informed consumer. Realizing why you use credit cards can help you use them in the best possible manner and can help keep you out of trouble with them. Credit cards are a tool available to you, and they can be a powerful ally if used properly and put to work in your favor.

(photo credit: The Consumerist)

Hank ColemanHank Coleman is a writer, entrepreneur, and professional in the government sector. He holds a Bachelor’s Degree in Business Administration, a Master’s in Finance, and is currently studying for his Certified Financial Planner (CFP) credentials. Be sure to follow him on Twitter @HankColeman.