The Benefits of Using Credit

By Eric Rosenberg
Reviewed by: Lauren Bringle, AFC®
Published on: 07/03/2019

Credit can be a powerful tool that helps you improve your finances, get access to better financial products, save money on interest, and can even save you from putting down a deposit opening utility or cell phone accounts. The benefits of a positive credit report and good credit score are extensive.

While some people have stories about getting burned with credit in the past, when managed responsibly it can be an incredibly valuable asset. If you want to know more about the advantages of using a credit card, read on to learn more.

Save on interest and fees

The biggest benefit of good to excellent credit is saving money. When buying a home, for example, good credit can easily save you tens or even hundreds of thousands of dollars on a mortgage loan. People with better credit often get a lower interest rate on auto loans, credit cards, private student loans, personal loans, and lines of credit.

If you plan to buy a home with a mortgage in the future, good credit might be a deciding factor in how much home you can afford and whether or not you can buy a home at all. But saving on the interest charge is just one of many ways having a good credit score can benefit your finances.

Manage your cash flow

When you buy a new purchase with a credit card, you don’t have to pay for it right away. The bank puts the money up when you swipe your card and you pay it back later.
If you pay off your entire credit card balance in full by the statement due date, a good habit to get into, you won’t have to pay any interest charge on the credit card purchase. So make sure you pay your credit card bill on time. See more about how to use a credit card wisely.

From the date you buy the purchase, you have the time until your next statement closing date plus about three weeks before you have to pay up. That can mean three to seven weeks of interest-free borrowing that allows you to pay off your balance on a date that’s convenient for you.

Avoid utility deposits

When you sign up for a new cell phone account or move into a new home and establish utility services, the provider will likely check your credit during the onboarding process. If your score falls below the company’s guidelines, you’ll have to put down a cash deposit to open an account.

In a nation where 78% of people live paycheck to paycheck[1], the added startup costs of utility deposits on top of moving costs can be financially challenging to say the least. Building a strong credit history can help you keep your cash in your own bank account instead of the utility company’s.

Better credit card rewards

If you use cash or debit for a purchase, you’ll get nothing other than the product or service you paid for. With a cash back or travel rewards credit card, however, you’ll get 1% to 5% or more back from each purchase to deposit in your bank account, reduce your balance with statement credits, or cover the cost of an upcoming flight or hotel stay.

With bad credit, you probably won’t get access to any of the best credit card offers or credit card rewards. Only a limited number of cards optimized for people with limited or bad credit offer any kind of rewards. But as your credit climbs into the good and excellent ranges, you can earn credit card reward points for everyday purchases you already make.

Once you’ve done your research, learn about how to apply for a credit card for the first-time.

Emergency fund backup plan

A recent report from the Federal Reserve upheld a long-known statistic that 40% of Americans couldn’t afford to pay for a $400 emergency[2] from savings. Seeing as the average car repair, home repair, or medical bill can easily be multiple times that $400 measure, it’s a good thing they have credit as a backup plan.

Ideally, you would have an emergency fund that can cover at least three to six months of expenses (double that if you’re self-employed). But even for the most prepared, it’s good to know they have access to more funds, if needed, through credit cards, lines of credit, or other borrowing options.

Avoid and limit financial fraud

If you use your debit card and someone steals your card number at a gas station, restaurant or online, the cybercriminal has access to drain all of the cash from your checking account. That can leave you unable to pay the rent or mortgage, without funds for food, and it can take months to get your money back ... if you can get it back at all.

Your fraud liability on credit cards is more strictly limited than debit. If someone does make an unauthorized purchase on your credit card, you just have to tell the credit card issuer and they will wipe the fraudulent charges from your statement. Most credit cards come with $0 liability for a fraudulent charge and provide more options for credit card fraud protection.

Purchase and travel protections

Benefits of using credit

Some of the best credit cards give you automatic insurance on every purchase. Rather than paying for expensive purchase coverage from the retailer, you can rely on purchase protection, extended warranty coverage, price change protection and other benefits offered by some credit cards.

When traveling, credit cards can offer rental car insurance benefits, trip accident or delay benefits, lost or delayed baggage insurance, and other helpful and valuable benefits that can save you a ton of money or hassle if something doesn’t go as planned.

Don’t underestimate the power of good credit

Good credit can save you many thousands of dollars if you use it well. But on the flip side, poorly managed credit can quickly turn into an expensive and difficult-to-manage endeavor. That’s why you should make sure you use your purchasing power responsibly and read your credit report or credit score.

The good news is though, even if you have bad credit right now, you can build credit over time to gain access to the credit accounts you want in the future. Considering researching what a credit builder card is and what it can do for your credit.

Take the time to master your credit and you’ll enjoy the dividends for decades to come.


  1. Credit Karma. "Pros and cons of using credit cards".

  2. Insider. "Credit cards".

  3. 360 degrees. "Credit Cards: The Pros and Cons".

About the author

Eric Rosenberg is the mastermind behind the Personal Profitability blog and podcast. He has both an undergraduate degree and a MBA in finance and his work has appeared in various media outlets. See Eric on Linkedin and Twitter.

About the reviewer

Lauren Bringle is an Accredited Financial Counselor® with Self Financial – a financial technology company with a mission to help people build credit and savings. See Lauren on Linkedin and Twitter.

Editorial Policy

Our goal at Self is to provide readers with current and unbiased information on credit, financial health, and related topics. This content is based on research and other related articles from trusted sources. All content at Self is written by experienced contributors in the finance industry and reviewed by an accredited person(s).

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Written on July 3, 2019
Self is a venture-backed startup that helps people build credit and savings.

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