Many people have a bad impression of credit cards, primarily because they see it as a debt-incurring tool. After all, credit card holders are essentially “borrowing” money from the bank to spend every time they swipe their card for a purchase, which they subsequently have to pay back — with interest if after an agreed date. However, if used responsibly, credit cards can actually be an excellent financial tool. Here are some reasons why credit cards can be a good thing to have in your wallet.

Emergency Cash

Credit cards are great if you are in need of some emergency cash for unavoidable occasions, such as unexpected medical fees or for a car repair. Credit cards can even grant you instant access to money when you make cash advances with your credit card at ATMs. However, such cash advances can carry some sort of withdrawal fee and a high annual interest rate. Alternatively, you can opt for a cash instalment plan (CIP) against the card balance or limit of your credit card.

Insurance Protection

Some credit cards also entitle you to some form of purchase protection insurance, which may compensate you or make it easier for you to return your purchases if they are broken. You may also be provided with travel and personal accident protection comparable to standalone insurance policies. In some cases, some banks may even offer to pay off your debt during the unlikely event of death or permanent disability if you were burdened by a huge amount of credit card debt during that time.

Worldwide Acceptance

Those of you who travel abroad often may find credit cards to be especially useful too. They make it much easier to reserve hotel rooms, resorts, rental cars, and various other essentials for your trip. In fact, you can even tap into cashback and reward points campaigns, as well as special discounts available to Visa and MasterCard card members to make your reservations more worthwhile. Some premium credit cards may also let you get preferential exchange rates at the issuer bank’s money changers if you need foreign currency.

Interest-Free Money

Another credit card benefit that you can tap into is the interest-free period, which is essentially a period in which you will not incur any interest charges if full payment is made then. This period often extends over 20 days, which is why most people refer to it as the 20 days free-interest period. If you time your expenses carefully, this credit card attribute could let you “borrow” or use money from the bank without having to pay the interest rate.

Cashback

Lastly, many credit cards are encouraging cardholders to use their cards with cashbacks and reward points. These can be quite appealing, especially since the cashbacks often apply to purchases that you need, such as groceries and petrol. You can also exchange your reward points for gifts or travel points. In other words, you are actually earning even as you spend.