If you’re like many consumers, you likely think of a credit card as just one of several ways to make a purchase. While some may have an aversion to using their credit card for fear that they might overspend and go into debt, when used responsibly, using your credit card can have several advantages, including added safety, rewards, and savings.
Here are four benefits you may be able to enjoy when using a credit card.
1. You Can Build Credit
Perhaps the most obvious advantage of using a credit card is building your credit score — that important number that tells lenders how likely you are to repay debt. If you’re new to credit or have poor credit, you’ll need to boost your credit score before a lender will consider giving you a mortgage on a house, or a loan for a car or other major purchase.
Making purchases with a debit card has no impact on your credit score, but paying your credit card bill on time will help give your score a boost. If you can pay your balance fully and on time, using your credit card for minor purchases throughout the week can help build your credibility with potential lenders.
2. You Can Earn Cash Rewards
The idea of a cash rewards credit card is simple — make purchases using your credit card and get a percentage of your purchase back in cash rewards. When you use our Founder’s Card, for example, you’ll earn cash rewards of 1.5 or 2%* on every purchase. Few other payment methods offer this benefit.
3. You Can Make and Track Disputes
Say you pay the deposit for a home repair, but the company fails to show up and perform the job. If you wrote a check or paid cash, you don’t have many options. But if you paid with a credit card, the federal Fair Credit Billing Act enables you to dispute charges with your credit card company.
4. You Can Better Avoid Heavy Losses from Fraud
When your debit card is used for a purchase or withdrawal, the funds are deducted from your account immediately. If the activity turns out to be fraudulent, you may have to wait for it to be reversed and for your money to be returned to your account, depending on your financial institution’s policy. This can cause other legitimate bill payments and transactions to be rejected or overdraw your account.
In comparison, if you notice fraudulent activity on your credit card, you can immediately open a dispute with your credit card company. While the disputed charge and any related charges are being investigated, you are not obligated to make payments on the disputed amount and cannot be charged a late fee for the disputed amount (however, you must continue to pay the undisputed portion of your bill on time).
What Happens If I Don’t Use My Credit Card?
Not only do you enjoy benefits like these when you use your credit card, but you also protect yourself from potential impacts of low usage that could follow you long into the future. Take a look at three of the risks you should be aware of if you choose not to use your credit card.
1. Your Credit Card Account Could Be Closed
If you have a credit card that you don’t use, the issuer could close your account due to inactivity. Credit card companies only have a certain amount of credit to issue to their customers, so many prefer to close dormant accounts and issue the credit to someone who will use it.
While you can get in touch with your issuer to try to reinstate the account once it’s closed, they’re under no obligation to restore it. You could lose the card for good, as well as any rewards points you’ve accumulated with your account. Be sure you’re familiar with the terms of your card.
2. Your Credit Score Could Take a Hit
Having your card closed for inactivity might sound fine— after all, you’re not using the card anyway. But there’s a catch — a closed account might cause your credit score to decrease. Losing a credit source affects many factors that impact your credit score, including your credit utilization ratio, which is one of the most important factors.
So, is it better to keep credit cards open, or should you close an unused card yourself? Unless you really can’t control your spending and would rather remove the temptation of having a credit card, it’s usually better to keep your card open and use it periodically as long as you’re not paying a hefty annual fee to keep it open.
3. You’re More Vulnerable to Fraudulent Activity
If you don’t use your card, chances are you aren’t closely monitoring your account or checking your statements. And if you don’t check your account, you might remain blissfully unaware of fraudulent activity on your card.
Even if you choose not to use your card, it’s essential to keep checking your account statements each month. Set up account alerts to make you aware of purchases so you can notify the issuer and lock your card immediately if you notice any activity on a card you’re not using.
Choose the Right Card for You
Learn more about our Classic Card and Founder’s Card to see which one is best for you, then apply today. You can also contact us for more information before you apply — we’ll be glad to help you choose the card best suited to meet your needs. We’re here to help our members manage their finances securely and enjoy all the benefits a credit card can offer.
*You can earn 1.5% cash rewards on purchases. You can earn 2% cash rewards on all purchases if you maintain a PSECU checking account and qualifying monthly direct deposits of at least $500. See the PSECU Visa® Founder’s Card and Visa® Alumni Rewards Card Rewards Program Terms and Conditions for full details.