Advantage of Credit Card

Topics: Credit card, Credit history, Fair Credit Reporting Act Pages: 2 (602 words) Published: May 26, 2013
First of I will list them and then explain what they mean.

1. Floating
2. Theft Protection
3. Credit History
4. Card Benefits
5. Tracking expenses
6. Fraudulent Purchases

Now I will provide a detailed explanation of what each is and why it is beneficial.

1. Floating, you're probably imagining something floating in the air; however this isn't what this term means. Have you ever heard "0.0% APY for 12 months"? This means that if I purchase an item, I don���‚��„�t have any interest on the purchase for a whole year. Disciplined people with good credit scores can get huge limits on their credit cards. They then can get "cash back" with their purchase to the point of their limits. They then can put this "cash back" into a money market or C.D. for a year and receive up to 4% in interest. Through this way credit cards are valuable tool to the consumer. Example: Bob has 3 credit cards each with a limit of 50,000 dollars. Bob goes to make a purchase and receives 100,000 cash back from two of his credit cards. Fortunately both credit cards provide 0.0% APY for 12 months. Bob immediately sticks this money in a savings account and pays back the 100,000 he borrowed over a twelve month period. Meanwhile that 4% on his hundred thousand is earning him say $3,000 in interest for the year. Therefore Bob can make an extra 3,000 dollars a year by doing essentially nothing. 2. Credit cards offer theft protection. If I have 100 dollars in my pocket and am robbed or the 100 dollars gets lost then I am out 100 dollars. However if I have my credit card in my pocket and it gets robbed/lost I lose nothing because I can simply call my credit card company and cancel the card. 3. Credit history is an extremely useful tool that saves the majority of Americans loads of money. Americans who pay there credit card payments back on time receive a sort of "A+" with the credit companies. This allows banks to shrug off some of the fear that you won't be able to pay them back...
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