The basics of a credit card – convenience, security, and borrowing

 A credit card acts as a simple and safe way to make payments:

·  Easy to carry and use compared to cash.

·  Widely accepted for in-person and online purchases.

·  Built-in fraud protection and consumer safeguards.

 By offering credit, a card allows you to borrow money for purchases:

·  It essentially functions as a short-term loan up to your credit limit.

·  Helps with cash flow and unexpected expenses.

·  Responsible use builds your credit history and score.

·  Even charge cards (that require full payment each month) may offer flexible payment options (such as with Amex’s “Pay Over Time.”).

 The benefits of credit cards go far beyond money management and convenience.

Most cards offer additional perks and benefits – sometimes very extensively. The card market is highly competitive, and issuers put together packages of benefits to encourage card applications and ongoing use.

This guide looks at some of the main benefits on offer. Not all cards offer all benefits, and some will charge an annual fee to cover these benefits.

For more details on the different cards available and what benefits they offer, see our guide to our Top 10 recommended cards.

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Responsible card use builds good credit

 Having a good credit history is important for most people. Of course, it affects which credit cards (both personal and business cards) you are eligible for. But good credit history is also important for future requirements for loans, mortgages or even rental agreements.

Using a credit card responsibly is one of the easiest ways to establish and grow your credit history. Being accepted for a credit card, remaining within the agreed credit limit, and making payments on time will help build a good credit score.

All personal credit card activity is reported to the main consumer credit bureaus: Experian, Equifax, and TransUnion. Business cards typically report to separate business credit bureaus (such as Dun & Bradstreet or Experian Business). Most issuers report only negative activity to consumer credit bureaus, but policies vary. Capital One is a notable exception here, reporting both positive and negative data – a useful feature if you're looking to build personal credit through a business card.

Fraud protection and security

 Credit cards typically offer well-defined protections. This is a major difference from using cash, or most debit cards. Personal credit cards are protected under the Fair Credit Billing Act (FCBA), and many business card providers offer similar protection.

These features give you peace of mind when making purchases, including online. Protection includes:

·  Zero liability policies: You are not responsible for unauthorized purchases.

·  Purchase protection: Get refunds or replacements if items purchased using the card are damaged or lost.

·  Chargeback rights: Dispute a charge if something goes wrong with a transaction.

Earning rewards: cashback, points, and miles

 Most credit and charge cards (both personal and business cards) offer rewards for usage. Depending on the card, this could be awarded as:

·  Cashback. A direct percentage of your purchases returned as a statement credit or deposit.

·  Points or miles with specific loyalty programs. Many cards are issued co-branded with a particular airline or hotel chain. In these cases, it is usual to receive rewards directly in that program.

·  Points within card provider program. Many card providers offer their own rewards currency – such as American Express Membership Rewards Points, Citi ThankYou Points, and Chase Ultimate Rewards Points.

These rewards are usually offered on all spending. Some details on how rewards work:

·  Most cashback cards offer a rebate of at least 1% on all spending (or equivalent in points/miles).

·  Higher reward rates are often offered with cards that have annual fees. This is a main consideration when determining if a card is worth the fee.

·  Bonus / higher rates are often offered for specific categories of spending. With personal cards these often include groceries, dining, gas, and entertainment.

·  Business cards are more likely to offer bonus categories such as office supplies, communications, advertising, or travel.

The value of rewards is important too. Cashback, of course, is easy to understand. Points and miles rewards currencies are not so straightforward. Several sources provide estimates of value – American Express Membership Rewards Points, Citi ThankYou Points, and Chase Ultimate Rewards Points are all typically valued at around 2 cents per point.

But the true value of points and miles depends on how they’re redeemed. It is often possible to achieve much higher value through use for hotel or airline flight awards.

American Express Membership Rewards Points, Citi ThankYou Points, and Chase Ultimate Rewards Points are all transferable to several airline loyalty programs. Once in these programs, they can be used to book award tickets with these airlines, or with any of the airlines they are partnered with.

The top value here typically comes from loyalty programs that offer fixed price awards. Many programs have switched in recent years to revenue-based award pricing – there is still value here, but less variation of course. Premium cabin travel can be excellent value here. For example, the price in points or miles for business class tickets may only be double (or sometimes less) the price for economy class travel. With standard cash tickets, the differences can be much greater, and the value per point/mile can be excellent here.

For more details and ideas for good value award use, see our guide.

Sign-up bonuses – big, upfront value

 Sign-up bonuses are one of the biggest incentives with many credit cards. Generous offers of large bonuses have become common as providers seek to attract customers.

 ·  As with ongoing rewards, bonuses are offered as cashback, points, or miles.

·  Bonuses are usually offered as a single fixed bonus, awarded after meeting a minimum spending requirement in an initial specified period.

·  Business cards often offer higher bonuses – but these may come with an increased spending requirement to trigger the bonus.

·  The bonus can often be increased further by certain card provider promotions, or through a referral.

·  Bonuses can be very lucrative. For example, the bonus of 150,000 Membership Rewards® points on offer with the Business Platinum Card® from American Express is almost enough for a return business class flight between the US and Europe.

There are strict terms on receiving the sign-up bonus. Most importantly, many providers now make bonuses available only once per card per person. However, you can often still receive bonuses for business cards, however, even if you have already received a bonus for a personal card with the same provider.

0% APR benefits – interest free borrowing

Many credit cards offer introductory 0% APR on purchases and/or balance transfers. Personal credit cards tend to have the best / longest offers, but many corporate cards still offer this.

·  0% APR offers are useful for large purchases, allowing you to pay over time without interest.

·  They are also a good way to consolidate existing high-interest debt and save money on interest payments.

·  0% APR offers often apply to balance transfers as well as purchases.

Some of the best offers from our Top 10 choice of cards include:

·  The Citi® Double Cash® Card has one of the longest offers - 0% on balance transfers for 18 months.

·  The Capital One VentureOne® Rewards Credit Card offers 0% introductory APR on purchases and balance transfers for 15 months.

·  For a business card, the Blue Business® Plus Credit Card from American Express features a 0% introductory APR for 12 months.

Travel perks – lounges, rebates, and elite benefits

 Many credit cards offer valuable additional benefits, above financial offers and rewards earning. Travel perks are particularly popular, and plenty of cards focus on offering benefits here.

Airline / hotel co-branded credit cards especially focus on benefits in this area, with offerings including:

·  Elite status in the relevant loyalty program.

·  Discounts or travel credits.  

·  With airline cards- free checked bags, airport lounge access, priority handling, or discount on rewards tickets.

·  Other specific benefits. For example, the Alaska Airlines Visa Signature® credit card offers a Companion Fare each year (when spending $6,000). This gives a free companion ticket for just taxes and a small fee.

Premium general-purpose travel cards (not co-branded with airlines or hotels) offer wider benefits. These are at their most valuable with the premium higher fee cards. These can include:

·  Airport lounge access benefits (though several partner programs including Priority Pass).

·  Automatic elite loyalty status with multiple programs.

·  Global Entry/TSA PreCheck fee credits.

·  Access to exclusive travel deals and programs.

Rebates and discounts with specific retailers

 As well as cashback or rewards on all purchases, many cards also offer specific discounts or rebates.

There are several different ways discounts can be offered:

Fixed rebates with retailers. Several premium paid cards offer direct credits when used with particular retailers. This is part of the defined card benefits and is usually offered as a maximum monthly or annual rebate.

For example, the American Express Platinum Card® offers fixed rebates with Saks, Walmart+, Uber, and several digital services providers. The American Express Business Platinum Card® instead focuses on business spend with credits including Dell, Adobe, and Reed.

Travel rebates. Premium travel-focused cards often include rebates on spend with hotels and airlines.

The American Express Platinum Card®, for example, offers up to $200 annual rebate with certain hotels (Fine Hotels + Resorts or The Hotel Collection) booked through American Express Travel. The American Express Business Platinum Card® includes a $200 annual credit for incidental spend with one chosen airline.

Tailored offers. Most card providers also offer regular additional offers, with retailers, hotels, airlines or elsewhere. These are usually promoted through apps or website and usually need to be individually activated. These can be tailored based on your spending habits or profile, and location.

Insurance benefits with credit cards

 Many credit cards include built-in insurance benefits, including for card purchases, travel, and rental cars.

Insurance benefits are not the same across all credit cards. Premium travel or rewards cards typically provide more robust coverage with higher limits and fewer exclusions, while no-fee or basic cards may offer minimal or no insurance benefits. Always check your card’s guide to benefits to understand the exact terms and exclusions.

Typical insurance benefits can include:

Travel Insurance. Cover can include trip cancellation, trip delay, and lost luggage coverage. Premium cards (including Chase Sapphire Reserve and American Express Platinum cards) usually offer more comprehensive and higher-value protection as a major benefit.

Rental Car Insurance. This can include collision damage waiver, often as primary coverage with premium cards. Some cards offer secondary coverage only (this kicks in only after your personal insurance is used).

Purchase Protection. This offers cover for damage or theft of new purchases for a limited period (typically 90–120 days). Premium cards often offer higher limits and broader coverage.

Extended Warranty. This cover adds additional time (usually 1 year) to a manufacturer’s warranty on eligible items.

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