How to use a credit card to your advantage

Co-author: Michelle Norton

There are many advantages of having a credit card. If you’re disciplined with your spending, pay off your card balance in full every month and understand how they work, they can streamline your finances and even make you money, in the form of reward programs. We’ve listed 12 ways credit cards can help you to manage your finances. 

Before we get into the nitty-gritty, let’s start by pointing out that credit cards are not for everyone. If you’re not disciplined – and find easy credit too tempting – then you might be better off sticking to spending your own money and using a debit card instead. Credit cards can get you into deep financial trouble, particularly if you’re an impulse buyer. And, if you already owe money on your credit card, then paying it off should be your top priority.

On the other hand, if you do have the self-discipline to manage your spending, there are some great advantages to using a credit card. Here are 12 ways credit cards can make your life easier:

1. Rewards programs

There are many credit cards that have great reward programs, but they need to work for you. There’s no point overspending or buying things you don’t need just to get points. So, think about how you use your credit card and then choose which program benefits you most. You can spend credit card rewards points on all sorts of things, from flights and car hire to petrol and groceries.

Also, check if there’s an annual fee for the card. Sometimes these can be paid for with points, but you need to make sure you’ll earn enough points in a year to pay off the fee and still have enough left over to merit the card’s use.

You can compare rewards credit cards on the Canstar website:

Compare credit cards with Canstar

2. Frequent flyer rewards cards

If you’re a jet-setter, or travel a lot for work, why not get rewarded for being a frequent flyer? Flight rewards credit cards are very similar to rewards credit cards, in that you earn rewards by making purchases, but these rewards points are for use specifically on flights, airport lounges and concierge services. You can also use your rewards points to upgrade your existing economy seat to business or first class.

However, if you like spending points on things like gift cards and household appliances, then you’re probably better off with a standard rewards card. Also, keep in mind, the more you spend the more you earn. If you don’t put a lot on your plastic, you could end up paying a lot in fees without seeing a return in terms of rewards points. Read more on choosing a rewards credit card in this Canstar guide. You can also compare cards available in the rewards space by hitting the button below.

Compare credit cards with Canstar

3. Sign-up bonuses

Many credit cards offer attractive bonuses that reward you for signing up with them, such as large amounts of bonus points, complimentary flights, low or nonexistent fees and other long-term perks, such as promotional and reduced interest rates.

Not all cards with a sign-up bonus are good value, though, so you need to have a close look at the terms and conditions before applying. Chances are, there’ll be certain requirements that need to be met, such as a minimum expenditure during the first few months. If these requirements are in line with your spending habits, then a credit card with a sign-up bonus can be excellent value. Check out the different features of various credit cards by hitting the button below.

Compare credit cards with Canstar

4. Cashback

Cashback credit cards allow you to swap your rewards points for cash that is paid straight into your credit card account, usually once a year. Typically, cashback rates are 1% of your spend: that’s $10 back for each $1,000 you put on your card. Lower-fee cards tend to cap the amount you can earn, while premium cards with higher annual fees set no upper limit. Whether this is a worthwhile option will depend on the card’s fee and cashback rate and your annual spend – so make sure you run your ruler over the figures to see if a cashback card is the right option for your level of spending.

5. Complimentary travel insurance

Most credit cards come with a number of consumer protections, including rental car insurance, purchase protection insurance, extended warranty insurance and even travel insurance.

These complementary extras can save you a great deal of time and money, as well as peace of mind, so it might be worth looking for credit cards that offer travel insurance.

 Compare credit cards with Canstar

6. Fraud protection

With the wealth of scams and phishing attacks that occur today, it’s reassuring to know that the vast majority of credit cards on the market have security and fraud protection, keeping your money safe from fraudulent purchases.

For example, Visa credit cards use Verified by Visa, a password-based system that protects you when shopping online. Additionally, most cards come with a zero fraud liability guarantee, which covers you for fraudulent transactions, as long as you’ve complied with the terms and conditions of your card’s use.

7. Convenient and safe online shopping

Not only are credit cards convenient to use for daily point-of-purchase shopping, but they’re also much easier to use online. As mentioned above, most credit cards now come with several layers of security and fraud protection, so you’re at little risk of losing your money when making online purchases. Most sites also give the added benefit of saving your credit card details. If you’re using a reputable website that you trust, this can be a great way to save time on future shops.

Read Canstar's guide on safe online shopping

8. Less cash on hand

Credit cards are not only a more convenient payment option for a lot of people, but they are also safer; a credit card can be cancelled quickly if it’s stolen. If your cash is lost or stolen, it’s usually hasta la vista, baby!

Compare credit cards with Canstar

9.  Works with any currency

Wherever you are in the world, your credit card will do the same job – albeit plus a small currency conversion fee, although there are some cards that don’t charge this fee in certain stores and countries.

Travel credit cards are a popular way to spend money overseas, and good ones offer strong exchange rates and other benefits, such as concierge services and pre-authorisation for hotel bookings.

10. Global acceptance

If you’re travelling overseas, having a credit card can be a safer way to travel and make purchases. Not all debit cards are universally accepted, whereas credit cards have global reach. However, it’s always a good idea to take some cash with you, plus a back-up card as well, just in case!

11.  Build your credit score

If you pay off your balance in full every month and mange your spending, having a credit card can help build your credit history and credit rating. A good credit score will make it much easier to apply for various loans, such as car loans and home loans, so practising good repayment habits with a credit card can be a great way to build a positive credit score. But be careful, if you miss only a few minimum monthly repayments, it will leave a serious black mark on your credit history.

12. Interest-free days

The final benefit of using a credit card is the number of interest-free days it offers. The majority of credit cards offer a 55-day interest free period – that means no interest on purchases over the 55-days from the first day of your statement period until when that period’s balance is due. While ultimately you’ll have to pay your balance, or be hit with interest, your card’s interest-free period is a great tool in managing cashflow around your personal finances.

Ultimately, if you have good self-discipline and don’t spend more than you earn, a credit card can be a handy financial tool you can use to your advantage. To find the right one for you, start by comparing your options on the Canstar website.

Compare credit cards with Canstar

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