By G Castañeda
Credit can be used as a tool for financial success. Just like other tools, it has its pros and cons and the cons pile up when a tool is used improperly. Taking out a home loan is a good example of using credit to acquire a very useful resource. This is especially beneficial if your monthly home loan payment is lower than your monthly home rental payment.
Taking out a student loan is another example of using credit for a good purpose. While estimates of how much more a college graduate earns compared to someone who graduated high school differ, what is clear is that college graduates earn more over their lifetimes than those who finished high school only.
So while arguments for the general benefits of a home loan and a student loan can be made, the benefits of having a credit card – a more common credit vehicle – can also be laid out. It must be stressed though that using a credit card carries with it certain responsibilities for the lender such as paying the credit card bills diligently. Swiping your credit card to take care of needs and not wants is also critical for the responsible use of credit and good financial management.
Benefits of Having a Credit Card
A credit card can help you build a credit history. This credit history is then used to calculate your credit score which lenders will use among other factors to determine your interest rate when you decide to take out other loans. Getting a good credit score will help you get lower interest rates and this has a huge impact on the amount you pay for the monthly loan payments. This is also where paying for your credit card bills diligently makes an impact because this helps increase your credit score.
Most credit cards also offer a lot of rewards to card holders. Many credit cards out there let the cardholder earn reward points that can be exchanged for a variety of things such as air miles that can go towards an airline ticket to Malaysia for example or gift certificates to many large retailers. Some credit cards will provide cashbacks for purchases.
Having a credit card is also convenient especially for frequent travellers. Credit cards are accepted widely around the world so it’s easy to use your card for your hotel stay. It’s also easy to use your credit card to book for your trip on many online travel websites like Expedia or Orbitz.
Other benefits that credit card holders also get to enjoy are extended warranties for valid purchases, price protection, and other special offers. Credit can be used as a tool for unlocking many benefits. Home loans can help you get a home and save you from the costs of renting while student loans can help you get an education that will help you get a high paying job. Credit cards too have many benefits such as helping you build a credit history that will help you get lower interest rates for larger loans.
G writes for Compare Hero, the most comprehensive financial comparison service in Malaysia. Compare credit cards, broadband plan, and others at a competitive price.