by Susan Quilty

Created on: August 31, 2009

The advantages of using a credit card include convenience, security, and even earning rewards based on your purchases. However, credit cards can tempt you to spend beyond your means which leads to paying high interest rates and possibly sinking into debt. Before opening a new credit card, take the time to understand its benefits and how to take advantage of them without getting yourself in debt.

With any credit card, the best plan is to pay off the balance on time every month. If there are no annual fees, you can earn rewards while deferring your payments and keep from carrying around a wallet full of cash. Yet, if you carry a balance forward from one month to the next or pay your bill late, the interest rates and late payment penalties will quickly outweigh the advantages of using your credit card.

If you pay off your balance on time each month, here are some of the advantages to using a credit card:

1. Convenience - You do not have to worry about carrying around enough cash to cover your purchases or take the time to write out checks while other customers grumble in line behind you. Credit cards make it easy to shop online and may speed up some transactions as you do not have to wait for the seller to receive your check or complete a Paypal transaction before sending your purchase.

2. Security - Most credit cards offer some form of buyer protection. If a payment is in dispute, the charge can be often be canceled from your card. In the case of identity theft, many credit card companies will flag suspicious purchases, put a hold on your card and contact you for confirmation before letting allowing more purchases. If your credit card is stolen and you promptly contact the credit card company, the credit card can be canceled and you will not be liable for purchases made after the theft.

3. Reward Plans - Many credit cards offer reward programs that earn items or even cash back based on how much you use the credit card. There are many different reward programs to choose from. Specific store credit cards may earn points toward a gift certificate to be used at the store. Some cards may offer points to use for airline tickets. Some credit cards can even be connected to college savings plans, so your purchases help save for your child's education.

4. Deferred Payments - By charging high ticket items to your credit card, you buy yourself some time before having to pay for the item. During that time, your money can be earning money in your bank account. For example, if you buy a $2,000 computer with your credit card on August 5th and the credit card payment is not due until September 15th, that $2,000 can stay in your bank account and earn another month's worth of interest before you pay the bill.

By paying off your bill in full each month, you can enjoy these advantages of using a credit card. Additionally, using a credit card responsibly in this way will also help raise your credit rating which will come in hand when you decide to take out a loan to buy a car or a new home.

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