5 Good Reasons to Use Your Credit Card

Credit cards could use a good publicist. The media rarely reports about their positive attributes.

On the other hand, we read a lot about the dangers of credit card use and the debt they can rack up quickly. Fifty-five percent of Americans with credit cards carry debt on them. Racking up too much debt can drag you into a dangerous area that can harm and even cripple your financial situation.

But credit cards have plenty of value when you use them wisely. Here are five ways a credit card can be a smart move.

1. Credit cards help you build credit

Remember: To qualify for credit, you need a credit score. No history of credit makes you “credit invisible.’’ It might be fun to be a ghost at Halloween but when it comes to getting credit, you want to be visible. Without a credit history you cannot obtain a mortgage or auto loan...you might even find it difficult to rent an apartment without a credit history.

One of the quickest ways to build credit is to use your credit card. Your payment history makes up 35 percent of your credit score. By using a credit card for purchase, you are actually helping your financial future.

Of course, this comes with a huge caveat. When you put purchases on your credit, be sure to pay them off in full and on time. That keeps you out of the quicksand, on firm financial footing, and gives you a leg up on your credit score.

2. Credit Cards are safer to carry around than cash

When I go away, I bring very little cash. Instead, I use my credit card, which I carry in a very secure spot. This reduces the risk of pickpocketing or other theft. Flashing a wad of cash in an unfamiliar location is not a good look (and potentially a dangerous one).

If a credit card is stolen or lost, immediately call your card issuer and report the loss. Federal law limits your liability for unauthorized charges and the sooner you report the loss, the better.

On the other hand: Lose cash or have it lifted from your wallet? Good luck ever seeing it again.

I am very grateful for my credit card in these instances. I just make sure I pay it off before the due date, sometimes even that very night. That keeps me feeling physically and fiscally safe.

3. Credit cards can offer rewards

I have taken two round-trip flights to Florida free with one of my cards with plans for another this winter.

Rewards cards can pay you back in airline miles, gasoline or cash, to name a few possibilities. You earn your rewards based on your spending, so if you pay your balance in full, the rewards won't cost you anything.

So make a big purchase, pay it off by the due date, and you, too, can enjoy the Florida sunshine...for free!

4. Credit Cards create a paper trail

Whenever you use your credit card, the transaction is recorded by your card issuer. They use this record to bill you every month.

That same record is a safety net for you. What happens, for example, when you buy a gift card for a business that promptly closes down? If you used a credit card to purchase it, consumer protection laws can qualify you for a full refund. Your credit card may offer some very good purchase protection for theft and damage, along with an extended warranty on the product, which you wouldn't get if you paid cash. A paper trail can also be valuable if you're ever forced to file a complaint against a merchant or vendor.

On a day-to-day basis, that paper trail can help you keep track of spending, which in turn can help you better manage your finances. A money management tool like My Money Manager can automatically import your transactions and give you a snapshot of exactly how you're spending your money. It's much harder to do this with cash; not impossible, just more cumbersome.

5. Credit cards can help in an emergency

Life is unpredictable and there are situations that require immediate payment, right here, right now, to cover. Your car breaks down and needs an expensive repair, for example, or your heater hits the skids. At times like this, a credit card can be a lifesaver.

Credit cards can be the perfect antidote for panic. Pull out your card and the immediate crisis is solved.

Of course, the financial repercussions remain. So pay it off as soon as possible, ideally with cash you have socked away for emergencies.

Ready to research a new credit card? Our guide to savvy credit card ownership will help you make the right choice. It's free and you can download it here.