A Financial Revolution 

March 31, 2006
The Perks of Plastic
In my last post I listed seven credit card trends. To follow up, here are seven benefits of credit cards (courtesy of TMF):
  • Convenience - no need to carry around large sums of cash for those big purchases.
  • Budgeting - each month you receive an itemized list of your expenditures.
  • Boosting creditworthiness - building a good credit history makes you more attractive to lenders when it comes time to buy/refinance your home.
  • Charging today, paying next month - if you pay off your balance each month, you get to borrow the credit card company's money for free (at least for the time between the charge and the payment due date).
  • Negotiating better deals - Credit card companies are often willing to negotiate their rates or fees.
  • Teaming up with a corporate titan - Many cards offer purchase protection and will fight for you when there is a dispute with a merchant.
  • Protecting you from thieves - You are generally not liable for fraudulent charges (after the first $50) on your credit card.

I find this list helpful, but I think some changes are necessary. First, the negotiating better deals is a weak argument because the alternative might be not having a card at all (i.e., no annual fee or interest rate). Also, the last item is somewhat ironic. Although they do usually protect you from fraudulent charges, the credit card companies loose practices are one of the reasons ID theft is so common. Finally, I would add the following perks:

  • Earning rewards - many programs offer cash back, airline miles, or products.
  • Saving money - some cards offer discounts on services or products. For example, American Express cards offer discounted concert tickets.
  • Improving travel experiences - have you ever tried to rent a car without a credit card? Reserve a hotel room? Next time you buy your airline ticket in cash, prepare to spend some extra time talking with security.
  • Insuring you on the road - most cards now offer insurance coverage for theft of or damage to most rental vehicles.

What do you think? Are there other perks that you feel should be added to the list?

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