Many credit cautious people are trying to avoid any unnecessary debt by avoiding even credit cards. While in most cases this is a very smart approach to manage ones own finances, resisting to get a credit card at the end may not be the smartest thing to do. Responsible managing of your credit card account can benefit you in many different ways. In this article we list 10 main reasons why getting a credit card can indeed be a very good thing to do:

(1) Building your credit history. If you have no credit, there are limited number of records on your credit file. One day you may require a car loan, personal loan or mortgage and if there is not much information about you, the bank may be hesitant to approve your loan application in the future.

(2) More convenient interest rate on other loans. Following previous point, if you have established and good credit history, paying your credit card repayments regularly and by due date, then your bank may offer you lower credit margin on other loans. You will be seen as more credit worthy customer.

(3) Having financial reserve during emergencies or when unexpected bills hit you. It’s always better to have some extra money available to spend than applying for loans in a hurry. Additionally, your available credit card balance costs you almost nothing, except the credit card account maintenance fee which for the cheapest credit cards is not more than $1 or $2 per month. This is truly affordable.

(4) No transactional fees. If you are using your credit card for everyday purchases, not making ATM cash withdrawals and paying the balance in full every month, there are no transactional fees. If you used your debit card instead, many cheque (current or everyday) accounts charge transactional fees. For credit cards there are no such fees.

(5) Earning interest on your cash. By using credit card you get usually 55 days to pay the money spent back. Your cash which you would normally use to pay your bills and everyday purchases you can now put into your savings account and earn some extra interest during these 55 days. It may not be a huge amount given recent low interest rates on savings accounts, but it will stack up. Yearly it can add up to a quite significant amount.

(6) Prestige. Yes, credit cards are also about prestige. Ideally we should not compare ourselves or trying to keep up with the Jones, but the reality is that we do. If you go out with friends to a pub for a drink and the round is on you, would you not feel embarrassed in front of your friends asking you why don’t you pay with your credit card and explaining that you have none?

(7) There are many types of payments that can be done only with a credit credit card. These are online purchases, hotel bookings, flight ticket bookings, rental cars and many other, mostly related to traveling. But even if you don’t travel a lot, there are still situations when you will need a credit card. Not having one at hand can be both inconvenient and embarrassing. Imagine this: Your employer will send you unexpectedly on a business trip. When you check-in at your motel, the reception staff usually asks you for a credit card as a deposit for eventual minibar use. How would you feel telling them that you have no credit card and being required to pay the deposit in cash?

(8) Getting some cash back or earning reward points. Surely this is no huge amount, since usually you can earn between 0.5% to 1.5% of your credit card spending back. But if you put as much expenses on your credit card as possible, including utility bills (electricity, gas, phone, water, broadband, Sky TV, etc) in addition to your everyday spending for grocery, clothing or petrol then at the end of the year you can get back couple of hundreds of dollars. Reward program joining fees are usually few tens of dollars, so it’s really worth it.

(9) Better budgeting options. These days in most western countries people can use credit card with few exceptions for almost all their spending. If you use your credit card for as many purchases as possible instead of cash, you are also creating an electronic trail of your spending at the same time. Many banks allow you to download your credit card statements in an electronic format. Some even offer analyzing tools directly in their internet banking. The downloaded data you can then easily dump into Excel and by using pivot tables in no time you will know exactly how much you spend, where and when. Knowing how you spend your money can help you adjust your spending habits and better manage your own finances in the future.

(10) Some consumer benefits are not available with cash or debit card purchases. These benefits are usually extended warranties for big electric items (fridges, computers, TVs, etc.) offered by some credit cards. Another consumer benefits of credit cards are quality issues when you can claim money back from your bank if the purchased product or service does not meet required quality standards and the merchant is uncooperative in solving the problem. Another very most important thing is a cooling off period or change of mind policy that applies for purchases made on credit only.