Making purchases with your credit card can be convenient, and some credit cards let you earn points or miles on your purchases. Using a credit card for everyday purchases, like groceries, can make sense, but it may not be the best choice for purchases with merchants who apply a surcharge for using your credit card. Let’s dive into the pros and cons of using your credit card for purchases and explore how to make informed decisions about what to charge and when.
Benefits of using a credit card for purchases
Credit cards can be a convenient way to handle purchases. Here’s why you might use them:
Convenience
Using a credit card can eliminate the need to carry cash or write checks. Many credit cards also offer $0 liability, which means you’re not responsible for unauthorized transactions.
Earning points, miles or cash back
Depending on the type of credit card you have, making purchases using a credit card can mean earning points, miles or cash back.
Building creditworthiness
Regular credit card use, coupled with timely payments, can help strengthen your creditworthiness. A strong credit history can help you qualify for loans and other financial products.
Expense tracking
Credit card statements provide a detailed record of your transactions, which can make it easier to track your spending and stick to a budget.
Potential drawbacks of using a credit card for purchases
While there are plenty of benefits to using a credit card, it’s important to keep a few things in mind:
Risk of overspending
The ease of swiping a credit card may lead to overspending. If you want to use your credit card for most purchases, it can help to set and stick to a budget.
Interest charges
If you carry a balance, interest charges can quickly add up. Paying off your balance in full every billing cycle can help you avoid these costs.
Impact on credit utilization
Using too much of your available credit can negatively affect your credit utilization ratio – the percentage of your total available credit in use – which plays a significant role in your creditworthiness.
What purchases should you put on your credit card?
Here are some times when it can make sense to put a purchase on your credit card:
Recurring and everyday expenses
Using your credit card for everyday purchases like streaming subscriptions or grocery deliveries can help simplify your finances while possibly letting you earn points or miles on your purchases.
Online shopping
Many credit cards offer $0 liability, which can make them a good choice for online transactions.
Travel expenses
From earning miles on purchases to enjoying travel perks like a free checked bag, some credit cards could enhance your travel experience.
What purchases should you avoid putting on your credit card?
Not all expenses are ideal for credit card use. Consider these scenarios where it may be better to use another payment method:
Merchants with surcharges
Some retailers charge extra fees for credit card payments. In such cases, paying with cash or a debit card might save you money.
High-dollar purchases you can’t repay quickly
If a large purchase will take months to repay, the accruing interest could outweigh the benefits of using your credit card.
Using your credit card wisely
If you decide to use your credit card for most of your purchases, here are some ways to avoid financial pitfalls:
Pay in full each month
Paying your balance in full each month can help you avoid interest charges. This can also help keep your credit utilization low.
Monitor spending
Regularly review your credit card statements to track expenses, spot errors and help ensure you stay within your budget.
Use a card that aligns with your spending habits
Consider using a rewards credit card that aligns with your spending habits. For example, you might pick a credit card that lets you earn more points on grocery purchases or more miles for travel purchases.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
