Different Uses for Credit Cards

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credit cards, cash-back credit cards, rewards credit cards, credit history

Credit cards have become very interwoven in to the fabric of today’s society and economy. In fact, it’s becoming almost an anomaly to actually pay for something with cash! Needless to say, credit cards, if used properly and paid in full each month, have a lot of utility.

Listed below are some of the most common and powerful uses of credit cards:

Building Credit History

A very beneficial use of credit cards is to either start or continue to build up your personal or business credit history. By using a credit card for several purchases each month AND PAYING OFF THE BALANCE IN TIME, you can improve your credit score and thus, increase your chances of a getting a good quality loan for future needs.

Reducing the Cost of Debt Payoff

Credit cards can be a powerful tool by offering options to consolidate credit card balances on to one lower interest card.

Generally, when you are searching for a new credit card, there are often very enticing deals that enable you to perform a balance transfer from your existing higher interest rate credit cards and then keep a 0-3% APR interest rate for a certain introductory period.

There are several things to watch out for before embarking on this form of debt payoff. 

  • First, you have to watch out for fees that are incurred/charged for transferring balances. These can often be 3% of the balance transferred. So, you’ll need to make sure that the interest rate savings you receive on the new card is worth this balance transfer fee.
  • Second, you will need to make sure that you are able to pay off all of your debt that is transferred within the introductory, reduced rate time period. If you cannot, you will often find that your interest rate will be increased after the introductory period to a level that could cost you more than your previous card.
  • Third, performing balance transfers is by no means a ‘magic formula’ that will make it effortless to pay down debt. It will take long-term discipline and MOST OF ALL, changes in spending behavior, to fully pay off your debt balances. In fact, if you’ve already got a credit card that has a fairly low interest rate (say below 10%), you might even be better off simply sticking with your current card and paying off the balance aggressively.

Obtaining Rewards and Cash Back

Another one of my favorite uses of credit cards is to receive a portion of your purchase amount back in either the form of cash back or rewards points. Typically, the amount of cash or redeemable rewards points you can receive is around 1% of your purchases. However, you can often get good credit card terms that enable you to get 3-5% cash back in certain categories.

In addition, credit cards often feature payment insurance protection on certain purchases. For example, if you pay for a rental car with a credit card, many cards offer insurance in the event that you get in an accident.

Short-Term Payback Expense Account

Another use of credit cards that is quite powerful (but that can easily get people in trouble if they don’t pay off their balances quickly) is providing some immediate access to funds to pay for expense items so that you don’t have to wait for money to be transferred from your savings to checking account.

By using a credit card for most all of your purchases, you can keep a minimal amount of money in your non-interest bearing checking account and just transfer money from your interest bearing accounts as it is needed to pay for expenses that come up.

A Bad Use of Credit Cards

While I definitely believe there are a lot of good uses for credit cards, one inappropriate use that I feel is worthwhile to mention is the use of credit cards for things you actually do not have the cash to pay for. Once you get in to this cycle of overspending, you can rack up debt balances that compound daily and get you in to trouble faster than you think.

How about you all? How do you use your credit cards? What is your favorite and least favorite feature about them? What credit card is your favorite?

Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/76657755@N04/6881501238/sizes/l/in/photostream/


  1. I personally use credit cards to get the sign up and cash back rewards. I make at lleast a couple hundred dollars a year and never pay a dime in interest!

    • Nice work Lance! I do pretty much the same thing. Which credit card is your personal favorite?
      My recent post The Pros and Cons of a Down Payment Assistance Program

      • Right now I have Chase Freedom and Chase Sapphire Preferred which I will cancel before they charge an annual fee. I also have a Navy Federal card which isn't as good.
        My recent post Random Thoughts, Round Up and Carnivals #27

  2. Manette @ BFPF says:

    We only use our credit card for large purchases, such as laptop, electronic gadgets, home furniture, and appliances. We make sure that the purchase are 0% installment and the balance is paid off before its due date. We do not pay for any interest but we enjoy the cashback rewards we get from using the card.

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