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What Are the Advantages of Having a Credit Card?

Lance Cothern

Paying for purchases with a credit card can offer many advantages if you can commit to spending only what you can successfully pay off in full each month. In fact, many of the advantages credit cards provide can save you money in the long run.

Some common advantages of having a credit card include:

-- Paying for purchases over time

-- Convenience

-- Credit card rewards

-- Fraud protection

-- Free credit scores

-- Price protection

-- Purchase protection

-- Return protection

-- Extended warranty coverage

-- Travel benefits

Paying for purchases over time. Credit cards give you the ability to pay for a purchase using your card today and pay off your credit card balance on a future date. Most issuers offer a grace period where you don't have to pay any interest charges. Typically, this grace period lasts from the date you make your purchase through the end of the billing cycle during which the purchase was made and ends when your payment is due.

However, if you're carrying a balance on your credit card, you usually have to pay interest on the balance owed unless you're taking advantage of promotional 0% annual percentage rate offer.

[Read: Best Cash Back Credit Cards.]

Convenience. Using a credit card can make managing your finances more convenient than using another payment method. Your credit card sends you a statement each month detailing exactly when, where and how much you spent on each purchase charged to your card. You can use the information from these statements to keep track of your spending. Additionally, some credit cards offer year-end statements that summarize your spending throughout the year, which is helpful for taxes and other tracking purposes.

Credit cards also provide a convenient payment method when making purchases online, since you can't pay for online purchases with cash. Using a credit card doesn't put your debit card or bank account information at risk.

Credit card rewards. The ability to earn rewards for the purchases you make is one of the most obvious advantages of having a credit card. Each rewards program has its own system for earning, managing and redeeming rewards.

"For frequent travelers, a rewards card that offers miles or points that can be used toward flights or hotel rooms can be very beneficial," says James Lambridis, founder and CEO of Debt MD, a service that connects consumers with lenders, credit counselors, debt settlement companies and bankruptcy attorneys. For those who prefer cash, a credit card that offers cash back as a statement credit, direct deposit or even a check may work better.

Depending on your spending habits, your rewards might even be able to pay for an entire vacation, says Lambridis. Many credit cards offer sign-up bonuses to entice you to apply for and start using them. The value of these bonuses can exceed $500. When you add up your everyday rewards with a couple of sign-up bonuses, it's easy to see how you could cover a vacation.

Fraud protection. Federal law limits your liability for credit card fraud to $50. If you notify your issuer you lost your card before any fraudulent charges are made, or when your card information (but not the actual card) is stolen, you aren't responsible for any fraud. Many credit card issuers take this a step further and don't hold you responsible for fraud at all as long as you report unauthorized charges in a timely manner.

To help make your credit card even more secure, your issuer may offer virtual account numbers you can use when making over-the-phone or online purchases. This way, your primary credit card number isn't put at risk if a data breach exposes the card information.

[Read: Best Rewards Credit Cards.]

Free credit scores. Many credit cards now offer free credit scores as a benefit. Some credit card companies print your credit score on your monthly statements. Others offer a free credit score program or allow you to view your credit score through the bank's website. Checking your credit score through a credit card benefit does not count as a hard inquiry or damage your score, says Lambridis.

When viewing your free credit score, make sure you understand what type of score you get. "Not all cards allow you to view your FICO score, which is the most widely accepted credit scoring model used by lenders. Some cards offer the ability to view your VantageScore as opposed to FICO," says Lambridis. Still, free credit scores can help you view the overall trend of whether your score is improving or declining.

Price protection. Have you ever bought something, then saw the price drop a few days later? Price protection might be able to help you as long as you made your purchase on a card that offers the benefit. Price protection usually refunds you the difference between the price you paid and the lower price, within certain guidelines. While price protection has been disappearing from many credit cards lately, it is still offered on some cards.

There are limits to the programs. The period for price drops is usually a couple of months, and you may have to provide an advertisement that shows the lower price to claim your refund. The amount you can save per purchase is typically limited to about $250, and there is a yearly cap on how much you can save with the benefit. Certain purchases are excluded, too.

Purchase protection. "Purchase protection covers against damage or theft of the items purchased with an eligible credit card," says Inga Cenatiempo, founder and luxury travel advisor at WanderWild Travel. These benefits normally protect your new purchases for roughly three months after you buy the item, but it may vary by the card issuer. "There are also exclusions to be aware of, for instance animals, tickets of any kind, boats, cars and aircraft, refurbished items, etc. Refer to your card's benefit guide for specifics," says Cenatiempo.

If your item gets damaged or stolen, your credit card benefit may repair the item or reimburse you for the purchase amount up to a limit, such as $1,000. In addition to per-item caps, the total amount of your claims over a year may be limited. "While I usually like to use a card that gives me the highest points return per dollar for each specific purchase, when buying a high-end item, it is prudent to go with the card that offers the best purchase protection," says Cenatiempo.

Return protection. Retailer return policies can vary. Return protection offered by your credit card may enable you to return your purchase for a refund even when the retailer doesn't allow it. The benefit usually lasts for about three months after you make a purchase, and you must use your credit card that offers the benefit to make the purchase.

The amount of money you can get from this benefit may be limited to a certain amount per item, such as $300, or per year, such as $1,000. Certain purchases, such as furniture, appliances and jewelry, normally don't qualify for this benefit.

[Read: Best Travel Rewards Credit Cards]

Extended warranty coverage. If you're purchasing an expensive item that can break and has a manufacturer's warranty, it often makes sense to use a credit card that offers extended warranty coverage to protect your purchase. An extended warranty can reimburse you or get your item repaired or replaced if it breaks outside of the manufacturer's warranty but before the extended warranty expires.

Extended warranty benefits vary by the card issuer, but they typically extend a manufacturer's warranty by one or two years. The maximum combined warranty, including the manufacturer's warranty and extended warranty, is usually limited to a certain number of years, such as seven, and likely has a dollar amount cap.

Like most credit card benefits, extended warranty coverage has other limitations, too. It doesn't apply to purchases that don't offer a manufacturer's warranty. Certain items don't qualify, such as cars, boats, aircraft and other motorized vehicles. To qualify for the benefit, you have to provide documentation that may include your purchase receipt and the original manufacturer's warranty. Make sure to keep this paperwork if you think you may need to use the benefit.

Travel benefits. Your credit card may offer a handful of features that can help you save money the next time you're traveling. These benefits might include an auto rental collision damage waiver, trip cancellation or interruption insurance, baggage delay insurance, trip delay reimbursement, free airport lounge access, a free checked bag, travel statement credits or other travel benefits.

Auto rental collision damage waiver coverage is one of the benefits that may end up getting used often if you rent cars frequently. This waiver typically kicks in when you decline the rental company's collision insurance and charge the car rental to your card that offers the coverage. Depending on your card's benefits, it may provide primary coverage, where it pays out first, or secondary coverage, where it pays out after you file a claim with your insurance carrier. Either way, it can save you from paying for the rental car company's insurance.

Certain credit cards offer perks that can reduce the costs you might incur when flying. For example, airline credit cards may offer a free checked bag on a particular airline or free access to that airline's lounges. Some cards even offer a travel statement credit to offset travel costs like airline incidental fees.

Other travel benefits can be useful in negative circumstances such as lost luggage and delayed or canceled trips. These benefits can sometimes offset part or all of your extra costs.

Make Sure You Have a Handle on Your Card and Its Benefits

Credit card benefits programs can vary by issuer and may even vary from credit card to credit card. All the details about how these programs work are usually detailed in your credit card's guide to benefits. You often receive this around the same time you get your card. Alternatively, you can usually download it from your credit card's website. Card issuers can change these benefits at any time, and the benefits typically have many rules and exclusions, so it's important to research your card's specific benefits before you use them, says Cenatiempo.

While secondary credit card benefits can be helpful, it's important to stay focused on the big picture. The benefits of having a credit card can be greatly diminished if you carry a balance and pay interest each month, says Lambridis. Make sure using a credit card to earn these secondary benefits doesn't cost you more in interest and fees than the value of the benefits you receive.

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