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10 Things That Happen When You Use Your Credit Card

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For decades, Americans today have used credit cards to fund their purchases while paying for them later. However, millennials are changing those rules, often preferring to use cash, checks and debit cards over credit cards when making purchases. But according to a 2021 survey by The Ascent, “45% of consumers prefer to use credit cards for purchases, which is the most common method of payment. This number is up from 36% in 2019.” [ 1 ]

Keeping plastic firmly tucked away in your wallet is a great strategy for anyone trying to avoid debt. With that said, many credit cards offer great benefits you don’t want to miss.


“The main misconception consumers have about credit and financing is that it leads to overspending and debt,” says Julie Pukas, head of card and merchant solutions at TD Bank USA. “It’s true that using a credit card can lead to these things, but when used responsibly, a credit card is a financial tool that allows consumers to shop safely while earning cash back or other rewards.”

By paying with cash, buyers miss out on cash back and other great rewards.

For example, depending on how much you spend, if you get a rewards card with 2% back on meals and 1% back on all other purchases, you could rack up $150 in cash back over the course of a year. Some cards even allow 3-5% cash back on other purchases, and the percentage increases with the number of partner merchants, depending on the credit card you have.

For some consumers, that $150 can add up to a month of free gas or a few months of free coffee. Choosing cash over credit means “consumers are leaving money on the table,” Pukas says.

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2. It’s hard for you to build credit
Without a credit card, it will be difficult for you to build credit. By opening introductory credit card accounts, making payments on time and keeping balances low, young consumers lay the foundation for a good credit history.

“Strategic and savvy credit use allows consumers to build strong credit scores,” Pukas says. “This credit profile can result in significant savings in interest rates for financing large purchases, such as buying a home or car.”

3. you work hard to get a mortgage
Mortgage lenders consider a variety of factors when making a loan decision, but they prioritize credit history. According to the Consumer Financial Protection Bureau, consumers with good credit qualify for more attractive loan terms.

MyFICO has a loan savings calculator that makes the benefits of a good credit score readily apparent. Enter a hypothetical credit score change into the calculator – while holding all other variables constant – and you’ll see how a lower credit score can cost you tens of thousands of dollars over the life of the loan.

4. You get terrible auto loan terms
Like mortgage brokers, auto lenders consider credit heavily when making decisions about auto loans. Few Americans have enough money on hand to purchase a car with cash, so most end up financing the purchase.

Good credit – which can be built and maintained through responsible use of credit cards – can help you get better terms on an auto loan.

5. You don’t have comprehensive fraud protection
In the age of identity theft, all consumers are at risk of having their card or card numbers stolen, hacking into their accounts or otherwise spending money in a fraudulent manner.

It is much easier to flag and revoke charges on a credit card than it is to withdraw money from a bank account through the dishonest use of a debit card.

“If someone is using your debit card fraudulently, they are spending the money in your account,” says Matthew Cohen, owner of the financial comparison website Cassavetes. “When someone uses your credit card to make fraudulent purchases, they are spending the credit card company’s money.”

6. you are short of money
If you use a debit card instead of a credit card, it can lead to some unexpected problems. For example, if you check in with a debit card, hotels and car rental companies often temporarily freeze the debit card, which can reduce the amount in your bank account.

Once the business pays in full, they will reimburse you. However, reimbursement can take time and, if the money was placed on a debit card linked to your bank account, it can leave you short of cash or potentially facing an overdraft.

7. No one has your back in a business dispute
Have you ever purchased an item only to find out that it was not as good as advertised? If you paid with cash, you may not be able to get a refund. At the very least, you may have to go through a lot of trouble to get your money back.

However, if you use a credit card to purchase an item, the card issuer will usually step in on your behalf. “The added weight of a card issuer that supports individuals can prompt merchants to resolve issues,” says Scott Vance, who is with Trisuli Financial Consulting in Cary, N.C.

8. You’ve reduced your emergency fund options
Post-survey research shows that most Americans save very little money for emergencies. This means they will have a hard time dealing with unexpected medical or dental problems, car repairs or job loss. Most experts recommend saving at least three months worth of expenses.

Emergency funds should not consist of credit cards alone. However, credit cards can supplement and support an inadequate rainy day. The more responsibly you use credit cards, the more likely you are to get a higher credit limit, which can add an extra cushion to an emergency fund.

9. You hurt job prospects
Many companies pull applicants’ credit reports as part of their employee background checks. While this practice is controversial, a poor credit history (or lack thereof) can reduce your chances of getting a job you could otherwise be qualified for.

“Credit reports indicate whether you’re responsible,” financial expert John Ulzheimer told CNBC. “And they also indicate whether you’re in financial trouble. These are attributes that are important to employers.” [2]
10. you spend more money to travel
Getting a travel rewards credit card gives you access to benefits you can’t get with cash payments. According to Forbes, there are two types of credit cards that can help travelers save money.

Universal cards. These offer points or miles that can be used to pay for any travel-related expenses.

Brand-specific cards. Airlines and hotels offer these cards for travelers who stick with a specific chain or airline.

Generous sign-up bonuses are another benefit for travelers. These rewards may include bonus miles, free airfare, free hotel stays or cash back.

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