Credit Cards Are Wonderful

Credit cards have to be one of the best financial inventions of the twentieth century. They offer:

1. convenience shopping locally: I do not have to go running to the bank for cash every time I want to buy something;

2. convenience when travelling: the exchange rate may be awful, but it is still a better deal to use a credit card than either travellers cheques or converting cash;

3. discounts: occasionally I still come across a merchant who tries to charge me a premium for using a credit card. This is rare and usually in remote/less developed countries. More commonly, a discount will be offered for using a credit card;

4. reward points: points build up. I turn most of mine into Asia miles. As difficult as it is to redeem Asia miles, I have managed to get some free flights and upgrades. Alas, there is no cash back in Hong Kong;

5. no fees: I pay no fees on any of my three credit cards;

6. use of money: depending on the timing of a purchase, I can continue to leave my money sitting in the bank earning interest (admittedly at very low rates). Since I pay in full each month there is no interest charge;

7. low security risk: credit cards carry security risks. People can add unauthorised purchases to your card. This is rare (it has never happened to me) and most card issuers will offer you a substantial degree of protection against fraudulent misuse of your credit card. The use of photo ID on a credit card helps reduce this risk even further for face to face purchases;

8. emergency fund: if I every really really need cash, in most of the countries I am ever likely to visit I can get a cash advance against my credit card. It is very expensive money, but its nice to know that it is there in an emergency.

Life without a credit card would be less convenient.

The downside? For people with no self control, they are an invitation to spend more than they can pay off in full each month (resulting in very high interest charges) or more than they would otherwise spend (resulting in reduced savings). I have no problem with either of these issues which makes credit cards an all win no downside arrangement for me.