A person using a credit card to make a meal.

When Is It Okay To Use A Credit Card?

Is it ever okay to use a credit card for a purchase? Credit cards get a negative rap, and for good reason, but there are some times when it actually makes sense to use a credit card. Let’s take a look at a few examples of when you should pull out the plastic.

There are actually more reasons to use a credit card than you might think. Take a look at some prime examples.

1) You Pay Off Your Statement In Full

The vast majority of credit cards come with a grace period that allows you to avoid interest. This allows you to charge up your credit card with regular expenses and simply pay off the statement at the end of the month. This can make it easier to make and keep up with regular purchases like food and fuel.

Using a credit card for regular purchases like this makes perfect sense, just as long as you pay that balance off completely every month. The credit card companies are masters at getting you to carry a balance, so you must use discipline. Realize that making just a minimum payment on your card will be very costly. Be sure to check off the “pay full account balance” option when you pay the bill and you will be just fine using your card for regular monthly purchases.

2) You Want To Improve Your Credit

With all of the talk about credit cards destroying peoples credit, you forget just how important they are in building a high score.

A large part of your credit score is made up of how you handle revolving credit. In fact, it is the second biggest factor in your rating, just behind your payment history. It accounts for a full 30 percent of your score.

What this means for you is that you need to have a credit card to have a good score, like it or not. So, get your credit card, use it responsibly and most of all, pay off the bill every month. This will allow you to avoid interest charges and to keep your balance from getting away from you.

3) To Keep An Account Open

Keeping your credit cards under control to the fullest means keeping your balance down, ideally to zero dollars. So, why not just keep it there and leave those credit cards at zero balance? The problem is that the credit card companies will close your accounts.

Credit card companies have a nasty habit of cancelling inactive accounts. In other words, if you do not use it, you will very likely lose it. To keep your account or accounts from being closed, you simply need to use them from time to time. This is as simple as using your card at least once every 6 months. It can be a small purchase like groceries or a tank of gas, but your cards need to be used periodically. Just pay off the balance immediately when you get your statement and your card providers will be happy with your usage.

4) For Fraud Protection

Paying bills and making purchases online can be risky these days and it is only getting worse. Instead of putting your checking account number or debit card out there, it may be safer to take advantage of a credit card. With most credit cards, you get top of the line fraud protection and issuers are very vigilant.

Sure, most checking accounts will protect you from fraud, but it can be a terrible ordeal. Fraud on your checking account can lock up your account balance for days and make life difficult. Putting online transactions on a credit card may be less risky and can save you from a lot of potential aggravation. If your card gets compromised, it is often less hassle working with a credit card company over a bank.

5) Rewards Are Far Too Tempting

As mentioned earlier, credit card companies are masters at getting you to carry a balance. One way they do that is to offer fantastic rewards like cash back or airline miles. The more you spend, the more you get and this can get you into trouble.

There is nothing wrong with taking advantage of free miles and cash back. In fact, if you are responsible, you should use these reward cards to their full extent. Make all of your regular monthly purchases on your card and max out the reward program. Then, when you get the statement, pay it off in full and keep all of those great rewards.

6) To Avoid An Emergency Loan

The payday loan industry is huge in this country and likely will be for decades to come. People will always find themselves in financial trouble and too few people have taken precautions by establishing an emergency savings. This can make even a small money emergency of 300 dollars or less a huge deal.

If you find yourself in the situation where you need an emergency loan, using a credit card would almost always be a smarter alternative. Even if you can not afford to pay off the balance when you get the statement, the charges should be considerably less than what a payday loan company would charge.

Use your credit card to handle your emergency and then work to pay it down as quickly as possible. If you do not have an available credit card and you need a loan, it may be a better idea to apply for a card before a payday loan. Many companies will overnight you a card or even give you a credit card number to use immediately.

Posted by
James Car

James Car is a finance, loan and budget expert based in the United States. After attending Brookhaven college, he went on to become a successful entrepreneur. He now enjoys writing articles that help people save and make the most of their money.