Pros and Cons of Shopping With a Credit Card - NerdWallet (2024)

FAQs

Pros and Cons of Shopping With a Credit Card - NerdWallet? ›

Putting purchases on credit cards rather than using cash comes with a raft of benefits, from earning rewards to gaining valuable consumer protections. The most common pitfalls of credit card use — overspending and interest charges — can be avoided with responsible use, but they're still worth being careful of.

Credit Cards are handy tools that help you in purchasing goods and services on credit. From bill payments, to booking your travels, to shopping, there are several ways you can use a Credit Card. A Credit Card allows you to spend stress-free and repay the amount at a later date, and earn reward points.

Keep in mind that credit card interest rates are high, and if you don't pay on time and in full, you could accumulate debt and hurt your credit score. Make sure to choose the right card for you and practice good habits to enjoy your credit card's advantages and avoid its downsides.

Credit cards can be a convenient way to not only pay for products and services, but also earn you rewards on your spending. Many cards also offer protection against theft and damage on pricey technology, like laptops and smartphones.

When you'll have to pay an extra fee: Merchants pay processing fees every time you use a credit card. Most of the time, those fees are rolled into the merchant's prices, like any other cost of doing business.

You can use a credit card for everyday purchases to build credit and to earn rewards for the spending you already do. But remember that you should only use a credit card for purchases you can afford to pay back and make on-time payments to avoid damaging your credit.

Credit cards are also better than debit cards because when you make a clothing purchase with your debit card, the money leaves your account straight away. With a credit card purchase, your money stays in your account until you pay the credit card bill.

What happens when you make a purchase using a credit card? ›

When you use a credit card to make a purchase, you're essentially using the credit card company's money. You then pay that money back to the credit card company, with or without interest, depending on the timing of your payment. Your credit card company gives you a credit limit you can make purchases against.

Using a credit card for large purchases could be a good option if you can still make your payments on time and in full. Otherwise, you might face compounding interest charges and a hit to your credit. There may be other ways to pay for big-ticket items or bills, like creating a savings account or taking out a loan.

It's not that debit cards are a bad way to shop online; they simply don't have the benefits or protections that credit cards have. You'll be more secure using a credit card, you could get some protections on your purchase, and you can earn cash or points back on your spending through credit card rewards.

Down payment, cash advances or balance transfers

A good rule to abide by is to not rely on a credit card for any kind of down payment. It will add to a larger cost and may be a sign that you shouldn't make the purchase. In addition, cash advances usually charge a higher rate than purchases.

Depending on the type of bill and the merchant, you may be able to use a credit card to pay bills. Mortgages, rent and car loans typically can't be paid with a credit card. You may need to pay a convenience fee if you pay some bills, like utility bills, with a credit card.

Paying for large purchases with your credit card. Using a credit card for large purchases can help you qualify for sign-up bonuses (also known as new cardmember bonuses) and give you more time to pay for items, but it also has the potential to impact your credit score.

Responsibility is the name of the game, and it's far easier to responsibly use your card if you're making small purchases, as opposed to larger ones that will take longer to pay off. This is an especially helpful way to build credit if you don't have any loans to make payments on.

If you are a responsible buyer, a Credit Card can be lucrative if you know how much to spend. If you fear a spiralling debt, then a Debit Card would be an ideal choice, but beware of shopping frauds.

“If you can pay your balance in full each month, or you've budgeted to pay it off over time, using a credit card for purchases can be a great way to earn rewards on your purchases and build credit,” Tayne tells Select.