Updated on June 29, 2021
If you’re like many consumers, you may think of a credit card as just one of several ways to make a purchase. And while some hesitate to use them for fear that they might overspend, when used responsibly, paying with your credit card can have several advantages, including added safety, rewards, and savings.
Read on to learn more about four benefits that may be available to you when using a credit card.
1. You Can Build and Improve Credit
Perhaps the most obvious advantage of using a credit card is establishing or building your credit, which you can see reflected in your credit score. Your credit score is a three-digit number that tells lenders how likely you are to repay debt. If you’re new to credit or have poor credit, you may need to boost your credit score before a lender will consider giving you a loan for a home, car, or other major purchase.
Making purchases with a debit card has no impact on your credit score, but using a credit card and paying your bill on time will help give your score a boost. If you pay your balance in full and on time, using your credit card for everyday purchases 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. When you use our Founder’s Card, for example, you’ll earn 2%* or 1.5% cash rewards 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, giving you peace of mind as you pay for services or shop.
4. You Can Better Protect Your Finances 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 won’t be obligated to make payments on the disputed amount and won’t 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 the benefits above when you use your credit card, but you also protect yourself from potential impacts of low usage. Take a look at three of the risks you should be aware of if you choose not to use an open credit card account.
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’ll 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, so be sure you’re familiar with the terms of your card and what the issuer’s policy is on inactive accounts.
2. Your Credit Score Could Take a Hit
Having your card closed for inactivity may not seem like an issue – 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 your credit utilization ratio, which is an important factor that impacts your credit score.
So, is it better to keep an unused credit card open, or should you close the card yourself? Unless you’re paying a hefty annual fee, it’s usually better to keep your card open and use it periodically, rather than risk taking the hit to your credit. If you want to remove the temptation to use your card, consider locking it in a safe place at home rather than carrying it in your wallet and removing the information from any third-party websites where it may have been previously stored.
3. You May Be 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 check 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 purchases if you maintain a PSECU checking account and qualifying monthly direct deposit(s) of at least $500. See the Visa® Founder’s Card and Visa® Alumni Rewards Card Rewards Program Terms and Conditions for full details.