Why Are Credit Cards Useful

By Jason Steele · April 15, 2024 · 9 minute read

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Why Are Credit Cards Useful

Buying with a credit card can offer such benefits as convenience, safety, and rewards. Whether you’re shopping for shampoo or a new sofa, there are many ways that you can pay for goods and services. You can use cash, checks, electronic payment, debit cards, or credit cards. Not every merchant may accept each of these forms of payment though, but credit cards are one very popular and useful option.

Here, you’ll learn more about the benefits of credit cards vs. other forms of payment, so you can know when to break out the plastic and when to spend with something else.

What Is a Credit Card?

What is a credit card? First, to be really, really literal: A credit card is a rectangle made of plastic or metal issued by a financial service company. It allows cardholders to borrow money to pay for goods and services with merchants that accept credit card payments.

Credit cards are different from debit cards in that they don’t whisk money out of your checking account right away. They also vary from a personal loan or a personal line of credit.

•   When comparing a personal line of credit vs. credit card, both are types of revolving credit, report your balance and payment info to the major credit bureaus, and charge interest. But unlike credit cards, personal lines of credit don’t offer rewards, can have a lengthy application process, and can have a lower borrowing limit than credit cards sometimes.

•   When comparing credit cards vs. personal loans, they both allow a borrower to access money that they have to pay back later, and they are both usually unsecured. However, credit cards are a form of revolving debt (meaning you can borrow money repeatedly, up to a limit), while personal loans are not.

Why Are Credit Cards Useful

Credit cards are incredibly useful for paying for everyday purchases, however big or small. In a minute, you’ll learn more about specific credit card benefits.

But, to look at the big picture of why credit cards are useful, consider the following:

•   They are convenient to carry and use.

•   They can allow you to spend and then pay off your debt over time.

•   There’s typically a grace period before you begin paying back the debt, an advantage over debit cards.

•   They can offer rewards, such as cash back.

•   Credit cards typically offer fraud protection.

•   Credit cards can help you build your credit history.

Credit Card Benefits

There are many benefits to having and using a credit card. As long as you use your credit card responsibly, these perks can be incredibly useful. Benefits to having a credit card include safety, rewards, tracking your spending, security, convenience and building credit. Here’s a closer look.

Safer to Carry and Use

If you lose a credit card or it gets stolen, you most likely won’t be held financially responsible for fraudulent purchases that someone else may make with your credit card. In some cases, you might be liable for no more than $50, even if someone charged much more on your card. Credit cards may also protect you when you have a dispute with a merchant.

On the other hand, if you lose cash or it gets stolen, there is almost no way to track that cash down and get it back. If you lose a debit card or it’s used fraudulently, you most likely will get the money back, but it can be a more difficult process than a credit card. And you may have to wait longer to get your cash refunded than if the situation occurred with a credit card.

Credit Card Rewards

Credit card rewards can be incredibly lucrative and useful. Some credit cards offer a flat-rate percent back on every purchase you make. Others have bonus categories where you can earn a higher rate of rewards on those purchases.

Credit card rewards can come in the form of cash back (say, 2% cash back on purchases), miles, or points that you can use for travel or other things. However, while the promise of rewards can be enticing, don’t spend more than you normally would just to get additional credit card rewards.

Track Spending

Credit cards can help make it easier to track your spending. If you use cash or check, you might have to keep track of your spending yourself (it’s basic math, but many people don’t want to deal with it), whether by paper or by creating your own electronic system or file.

With a credit card, all of your spending shows up online in your account, and within a few days of making the purchase. Plus, many credit card issuers automatically categorize your purchases into different types of spending, which can make it easier to stick to your budget. You can see how much you have spent in different categories each month, and you can export the data to some popular budgeting apps.


As briefly noted above, most credit card issuers offer zero fraud liability to cardholders, which can add a layer of security. Zero fraud liability means if you report fraudulent activity on your account to your card issuer right away, you likely won’t be liable for those fraudulent activities. The issuer will usually refund any amount fraudulently charged to the card and issue a new card and card number to the cardholder.

Plus, many card issuers have alert systems that notify cardholders via email, text, or phone call when suspicious activity is detected. Cardholders can confirm or deny that they made these purchases. This allows any potentially fraudulent activity to be caught right away.

These protections are not available for most debit cards and obviously not when you are using cash.


Visa and Mastercard, two of the most common credit card networks, are accepted nearly everywhere worldwide. American Express and Discover, the other two credit card networks, are widely accepted in the United States and occasionally in other countries. Wide acceptance makes credit cards convenient to use for everyday purchases.

Credit cards can be used in person, online, or over the phone to make purchases. They are also easy to carry with you all the time, and you don’t need to think about replenishing your money like with cash.

Building Credit

Responsible use of a credit card can actually help you build credit. If you pay at least your minimum amount due on time each month, you may build your credit score over time. (You’ll want to avoid, however, letting your credit utilization, or the percent of your credit limit that you spend, get too high.) Having good credit is important for many reasons, including getting a mortgage, applying for a job, or renting an apartment.

Recommended: Do Store Cards Help Build Credit?

When Not to Use a Credit Card

Even though credit cards are incredibly useful, there are times when it doesn’t make sense to use a credit card.

•   If you have to pay an extra fee to use the credit card, it may make more sense to pay by another method that doesn’t come with a fee, like cash, check, or debit card. Merchants pay processing fees when customers use credit cards and sometimes merchants pass along those processing fees to the customer. Unless the credit card rewards are high enough (like if you are working on a credit card sign-up bonus) that it offsets the fees, you are better off avoiding those fees.

•   Also, if you are carrying a balance and don’t expect to pay it off this month, you are likely paying not just for your purchase but for interest charges as well. So it could be wiser, if possible, to use a debit card when making a purchase.

•   Credit cards may also not be the best choice for you if you have a hard time controlling your spending. Since purchases made with a credit card don’t come directly out of your bank account, it may be tempting for some people to spend more than they can really afford to. If you’re an impulse shopper, proceed with caution. Swiping or tapping with a credit card can be so easy, it may make some people forget that, yes, the bill will actually be coming their way.

Examples of Credit Card Usage

Credit cards can be used to pay for goods and services. You can also finance purchases with a credit card. Also, you can use your credit card benefits such as travel insurance and purchase protection. And it can be used for purchases big and small.

•   Say that you see a $1,200 plane ticket to your friend’s destination wedding. It looks as if prices are only going to rise, but you don’t have that sum of money available. You could use your credit card to book the flight, and then pay it off over time.

•   Or you might be out for a run and, on your way home, remember that you’re out of coffee. If you have your credit card zipped into a pocket, you can easily pay for your coffee vs. having to go home, grab your wallet, and head out again.

Recommended: What to Buy With a Credit Card to Build Credit

Examples of Credit Card Issuers

A credit card issuer is the company that provides the credit card to the consumer. Issuers approve or deny a credit card application, decide how much credit to extend to the customer, determine the terms and benefits, and collect cardholder payments.

Some of the major credit card issuers include:

•   American Express

•   Bank of America

•   Capital One

•   Chase

•   Citi

•   Discover

•   U.S. Bank

•   Wells Fargo

Examples of Credit Card Networks

Credit card networks facilitate transactions between merchants and card issuers. They charge merchants fees for processing consumers’ card transactions.

The four major credit card networks are:

•   American Express

•   Discover

•   Mastercard

•   Visa

American Express and Discover are also credit card issuers. The other credit card issuers typically use either Visa or Mastercard networks.

Credit Card Tips

Understanding how credit card payments work is important so that you can maximize the credit card’s benefits.

•   Only charge what you can afford, and pay your bills on time each month.

•   Pay the full balance if you are able to, or aim for at least more than the minimum amount.

•   Review your credit report regularly to make sure everything about your credit card account is accurate.

•   Don’t share your card number, CVV, or additional details with anyone else.

The Takeaway

Credit cards have many benefits. They can be convenient; reward you with perks like cash back; and offer protection in case of loss, fraud, and disputes. Many people find them a convenient way to make a large purchase and pay it off over time. However, if you don’t use your credit card responsibly, the benefits may not outweigh the downsides.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.


Do credit cards help your credit score?

Responsible use of a credit card can help you build credit. If you pay at least the minimum due every month, you can establish an on-time payment history, which is a positive thing. However, you need to watch your credit utilization ratio, the amount of your credit card limit that you are spending.

Can store credit cards help you build credit?

Most credit cards will help you build credit, as long as you are paying your debt on time and the card reports data to the credit card bureaus. Even store credit cards build credit as long as the card meets this criteria.

What are the benefits to credit cards?

There are many benefits to having and using a credit card. These can include safety, rewards, tracking your spending, convenience, and building credit.

Photo credit: iStock/pixelfit

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .


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