Canadians love their debit cards and I, for the life of me, can’t exactly figure out why. I think it would be safe to say that most adult Canadians also have at least one rewards credit card in their wallets in addition to their debit card, but still many of them simply leave it in their pocket when it comes to making everyday purchases. I see this happen time and time again when I’m watching people in check out lines and when I’m out with acquaintances.
If you’re going to be purchasing something anyway and you can earn somewhere in the range of 1 to 10 percent of the value of the item you are purchasing in rewards, then why not utilize that as much as possible? Of course, the reward you will get depends heavily on how good your credit card is and how good you are at maximizing your rewards, but still something is better than nothing right?
Reasons To Use Your Credit Card For Everything
Not everything that you might need to purchase can be bought with a credit card, but most things can. In some cases, even things like tuition and insurance can be paid with a credit card and be eligible for rewards.
The Rewards Add Up
If you put all your spending on your credit card then the rewards add up very fast, especially for a middle income family. You can easily be looking at $1000+ worth of rewards every year if you put a little effort in choosing a top notch credit card. This doesn’t take into account sign up bonuses nor doing anything too extreme, just having a good credit card and funneling all your purchases through it as much as possible.
If you want to get fancy and start taking advantage of big sign up bonuses, promotions, and referral bonuses, then you can seriously up that amount. For instance, I racked up over $3500 in free flights (5 flights anywhere in North America) in three months this year by taking advantage of sign up bonuses for my wife and I along with referring a few acquaintances and friends.
Protect Yourself From Theft And Fraud
Almost all credit card come with 0 liability fraud protection. This means as long as you behave responsibly and report any known problems, like losing your card, you will never be responsible for fraudulent purchases made on your account and you will be quickly reimbursed for them.
The same can’t be said for using your debit card. Although I don’t know the exact rules as I think they vary from bank to bank, I do know that in some cases you may never recover your money and in most cases your funds will be in limbo for a period of time while everything is sorted out leaving you strapped for cash. This is reason enough for me to avoid using my debit card as much as possible.
Helps Build Your Credit
Having and using a credit card responsibly helps build and maintain a healthy credit score. Just make sure you pay it off in full every month, you don’t open way too many cards too quickly, and you keep your balance typically less than half of your available credit limit most of the time. Doing so will only help build your credit score and aid you in accessing credit when you need it in the future.
If you want to know more about how your credit score works, Liquid from Freedem Thirty Five Blog has broken down how a credit score is calculated into a nice pie chart.
Get Free Insurance On Your Purchases
Top tier credit cards come with all kinds of free insurance. Here is a list of some of the insurance benefits you can expect with a good card.
- Purchase Protection – If your purchase is lost, stolen, or damaged within the first little while you will be refunded the entire purchase price.
- Extended Warranty – The best cards will give you up to an additional 2 years of warranty on most products you purchase using the card, many others will give 1 extra year.
- Price Protection – If the product you bought goes on sale anywhere else, you can get a refund of the difference by calling in with proof.
- Travel Medical Insurance – Covers your medical bills while you are out of country or province.
- Trip Cancellation Insurance – Get a refund for non-cancellable travel purchases if your trip has to be cancelled before departure for a list of approved reasons (usually medical reasons or a death in the family).
- Trip Interruption Insurance – Covers your costs to get home if an emergency arises during your trip.
- Travel Accident Insurance – If a travel accident occurs and you suffer major injury or death, then you or your beneficiaries will receive a large lump sum payout.
- Flight Delay – Gives you some spending money and coverage for living expenses (hotel, food, etc) while you wait for your flight.
- Baggage Loss – Insures the contents of your baggage in the event that they are lost by the travel carrier.
- Baggage Delay – Allows you to purchase some replacement items if your baggage doesn’t make it to your destination on time.
- Rental Car Insurance – Covers damage to the rental car if you get in an accident or the car is stolen (not liability insurance).
Other Perks You Can Expect
Depending on the card you go with, there are a whole host of other perks that can go along with a rewards credit card not limited to the following:
- Personal Concierge – Someone you can call on as a virtual assistant to do basic work and research for you, particularly when it comes to making purchases of goods and services.
- Travel Help – If you are in a pinch while travelling, many cards offer a hotline you can call to get hospital information, legal services, emergency document replacement, general information, and various other travel-related services.
- Airport Lounge Access – Many travel cards give you access to high end airport lounges where they serve free drinks and offer a comfy resting place while you wait for your flight. Some even offer showers and free food as well.
- Special Event Access – American Express is well known for their front of the line program that gets you first pick to tickets at various concerts and events.
- Upgraged Status – Some cards will give you upgraded status in various travel rewards programs without having to earn it like Starwood Preferred Guest or Hertz Car Rentals.
- Roadside Assistance – Some higher end cards come with roadside assistance included which can represent a big savings for those that already purchase those services.
- Travel Vouchers – A voucher that either gives you a discount on travel or possibly a free ticket for your companion when you purchase a regular full fare ticket.
- Priority Check-In – Skip the security and check-in lines at the airport by accessing the priority lane.
Plus a travel bonus worth another $150.
Quantities are limited.
Valid Reasons For Not Using a Credit Card
There are some valid reasons for not wanting to use a credit card. These are the two biggest:
You Can’t Commit To Paying It Off Every Month
If you can’t commit to paying off your credit card every month, no matter what, then you should run away as fast as you can in the opposite direction. This comes down to knowing yourself and the amount of self-discipline you have. Credit card interest rates are extremely high and you could easily get caught in a debt spiral if you don’t pay it off every month.
You Will Be Enticed To Spend More Money
Some people say that spending money via credit card is just too easy and it causes you to spend more money. I think this is factual, but if you have good self-control than you should be able to keep this mostly in check. Besides, using a debit card is almost equally as easy except for you have a hard-limit on the maximum amount you can spend.
If you’re a cash-in-jars kind of person, then credit cards probably aren’t for you.
Excuses For Not Using A Credit Card
There are also a lot of excuses thrown around that don’t really hold water when you look at them closely.
They Aren’t As Safe As Debit Cards
Debit cards used to be less likely to be used fraudulently when then they were first to offer PINs and chips, but now credit cards offer these same features. In fact, they are actually significantly safer because of the zero liability guarantees they have that debit cards don't.
Related: Credit Card Terminology Explained
Paying An Annual Fee Is Stupid!
Actually, failing at simple math is stupid! Paying an annual fee makes perfect sense if you end up with significantly more value in rewards than the cost of the annual fee. Besides, there are plenty of great no-fee credit cards out there to choose from as well but you really should crunch the numbers because typically an annual fee card will come out ahead for people dedicated to funnelling all their spending through their credit card. The perks are usually way better as well!
They Cause Higher Prices
This is partially true because credit cards do charge fees to the merchant usually ranging from 2-3% of the purchase price. Interac debit cards only charge a small flat fee on each purchase that almost always ends up being less than the fee charged by a credit card.
This can indeed cause higher prices as those fees are passed on to consumers. However, people aren’t going to stop using credit cards all of a sudden without some sort of regulatory change by the government. That means if you are the one paying with cash and debit and not collecting any rewards, then you are subsidizing everyone else’s purchases. Are you ok with that?
It Hurts The Little Guy
Yes, the merchant has to pay a fee but it doesn’t really hurt them that much and here’s why:
- They typically pass the fee on to their customers anyway, so no big loss for them.
- They benefit from increased sales from customers who spend more by using credit cards.
- They benefit from easier book keeping and cashless transactions by accepting credit which saves time and money.
- It's their choice to accept credit cards or not. If they don’t want to, they don’t have to. Period.
What’s Holding You Back?
Is there anything else still holding you back from making the switch from debit or cash to credit? Leave a comment if you are a successful credit card user or if you are a die-hard debit fan!