Credit cards are a safe and convenient method of payment, but how often should they be used? Some prefer to use their cards for medium and large payments, but use cash, checks, or debit cards for smaller purchases. Yet few cardholders consider both the advantages and disadvantages of using their cards frequently for smaller purchases.
What are the benefits of using a credit card for smaller purchases
Rewards credit card holders who use their cards for small purchases can earn extra loyalty points, miles, or cash back. In addition, cardholders can use their statements as a record of all of their purchases. In fact, some banks offer powerful tracking and budgeting tools that allow cardholders to see how much money they spend at different types of merchants.
Another benefit to using a credit card for smaller transactions is that cardholders no longer need to carry cash with them. Cash transactions are more time consuming, and the resulting change that must be managed is less convenient. In addition, cash is not nearly as secure as credit cards.
Debit cards can be an acceptable alternative to credit cards and cash, but debit cards almost never offer rewards. Furthermore, debit card users are not protected by laws as strong as those in place for credit card transactions.
The case for not using credit cards for smaller transactions
There are some arguments against frequently using a credit card for small purchases. First, many consumers do not equate credit card use with spending, and are prone to over-spend when there is no cash involved.
In addition, frequently used credit cards will generate large statements that are difficult to scrutinize for errors or fraud. Finally, each time a credit card is used, there is a very small chance that the card’s information could be stolen for fraudulent use.
How to manage the risks
Ultimately, most cardholders will find that the benefits of using their credit cards outweigh the risks, which are manageable. First, cardholders should frequently check their balances and learn to associate every charge with cash expenditures. In addition, cardholders should take the time to scrutinize their statements to look for fraudulent charges or errors. While time consuming, completing this process once a month is more convenient than accounting for cash and change on a daily basis.
By understanding the risks and rewards of frequent credit card use, cardholders can make the best decision about how to use these powerful financial instruments.