Thursday, November 22, 2012

Why Every Responsible Adult Needs a Credit Card

In the modern world, paper money is not just an ever disappearing aspect of the economy, it is a very limited monetary unit. You can't use cash to make online purchases. Checks are only secure enough to use to pay bills to trusted companies. The same is true of most bank bill-pay programs. Cash is easy to steal and rarely traceable. Credit cards, on the other hand, offer the ability to carry high amounts of purchasing power with you wherever you go with very limited personal risk. Just as importantly, cards are the primary online and international purchasing medium in the global economy.

Cash Pitfalls

While many people take security in owning cash, it has many limitations in the modern world. For one, inflation and currency fluctuations can quickly impact the value of the cash you carry. A greater concern is that cash makes you a target because it is easy to steal and a liquid asset for quick disposal by definition. For this reason, you should only carry cash in limited quantities. Yet, large purchases must be made from time to time.

Another problem with cash is that in its pure form it can only be used for local purchases. Local purchases are still preferable for many types of items, but most people are finding the savings and and wide product selection offered online often make online purchases preferable to local purchases. Without a credit card, you are essentially squeezed out of the global market place.

Other Payment Options

Checks can in rare situations be used for online purchases, and can be used to pay for most items with a later billing date. More and more local stores are phasing out the acceptance of checks because it is so easy to write fraudulent checks. What's bad for consumers is that the routing numbers included on every check can be used to drain a bank account. In this sense, using checks can be more dangerous than cash, in that cash liability is limited only to what you carry.

To a large extent, you can use debit cards in place of credit cards and checks. However, debit cards carry similar, but even greater risk than checks. There are few regulations protecting funds withdrawn using stolen debit card information. Further, few banks have extensive debit card protection policies. Debit cards may be the riskiest of all purchasing mediums.

Credit Card Liability Limitation

Credit cards avoid nearly all of the financial risks associated with carrying cash. They also avoid the risks involved with using either paper or electronic bank drafts, more commonly referred to as checks and electronic checks and debit cards. Federal laws restrict liability for most types of card theft to only $50, while states may provide further liability restrictions and creditors often waive any of the liability remaining. In other words, if someone uses your card or card information without your authorization, the worst case scenario is that you lose $50.

Credit cards often offer far more extensive fraud protection than just credit card theft. If a seller doesn't provide you with exactly what you ordered or charges more to your card than what was quoted, you can challenge the charge with your finance company. If you have kept your receipts and can provide some proof of what has happened, you'll usually get your money back.

Many credit cards now come with varying degrees of product quality protection. For example, some cards will cover booking costs when airlines don't fly the route as purchased, or even insure your belongings should they be lost by an airline. Varying substitutes and insurances are available. The same is true for product purchases, with many cards providing various product quality guarantees that often exceed manufacturer and store guarantees.

Increased Purchasing Power: A Blessing or Curse of Credit Card Ownership

Credit cards do something for you that cash currencies and most forms of bank draft don't do: automatic currency conversions. You don't have to find an exchange and buy a currency before making a foreign purchase, so global purchases are greatly simplified. Most credit cards now carry a 3% foreign currency conversion fee, but this is generally at least as reasonable of a rate as you'll get doing a currency exchange at a bank.

Credit cards also offer purchasing power that may be in excess of your assets. In an emergency this can ensure you get what you need. However, this is the most common danger of card use. If you tend to be a compulsive spender, or otherwise financially irresponsible, a card can be a quick means of getting yourself in debt. This is the one reason why credit cards are not the best monetary purchasing medium for all people. If you are one of these people, you should never own a regular card.

There is good news for those who are not responsible credit consumers. Instead of a credit card, you can get what is known as a secured credit card. This type of card limits your purchasing power to the amount of funds you deposit in an account to secure it. You get all of the fraud liability limits of a regular card, while also limiting your liability for bad decisions to the amount of money you have deposited.

Get a Credit Card If You Can

Credit cards are the most secure and convenient monetary purchase medium in wide use today. Whether you make most of your purchases online or locally, you will benefit from the extra security and options provided by using credit cards. If you're not able to be responsible with a line of credit, a secured card provides all of these same benefits. If you are a financially responsible person, you can get all of these benefits provided by the card, plus have extra purchasing power in an emergency situation.


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