Advantages of Having Credit Cards

Q. I've finally "got it" when it comes to credit cards. After charging up four credit card accounts and spending four years paying them off, I don't ever want to see my name on another credit card.

My friend, Bill, however, insists I get just 1 major credit card to carry for emergencies.

I don't think I need a credit card now that I know how to manage my money. I told him if someone can give me 3 good reasons why I need a credit card, I'd get one.

What do you think? Are there advantages to having credit cards that I haven't considered?

A. Good for you that you've paid off your credit cards and vowed not to get into debt like that again! You've no doubt figured out better ways to manage your money.

However, Bill has a good point about credit cards - if you have an emergency and can't get to cash or checkbook, a credit card will come in handy.

The key for using a credit card, as you've probably heard is, never charge more in a month than you can pay off at the end of the month.

Consider this:

If you have a credit card that offers free airline miles for purchases, you'll earn free flights occasionally.

If you get a card that provides a check at the end of the year amounting to 1-2% of total annual charges, that's free money.

 
Some credit cards let you earn "points" for purchases to later, "spend" on items, like stereos, cookware, and house wares.

So, if you appropriately use your credit card and pay it off monthly, you can rack up extra money, free flights, or various housewares at no cost to you.

Believe it or not, there are even more reasons to have and occasionally use a credit card:

1. Car rental liability insurance is offered by some major credit card companies. If your card has this coverage, you don't need to pay the incredibly high fees for the "loss and damage waiver" car rental companies try to charge you when you rent a car.

 
2. Insurance coverage for baggage lost when you fly is also available, depending on the credit card you choose. In fact, some credit card companies offering this insurance actually cover in addition to what the airline will pay you for lost bags. This baggage coverage is no cost on some credit cards and is well worth having.

3. Price protection for items you purchase that drop in price after you buy them is offered by some companies. That's right, even though stores tend to allow 30 days after purchase for you to take in your receipt to be refunded such price differences, some major credit card companies allow up to 60 days and will refund you such price differences.

So, it's a good idea to have one major credit card for these reasons. Take extra effort to read all the fine print on a credit card application to determine which of these options are included with any credit card you're considering.

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