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3 Reasons to Keep a Credit Card in Your Wallet

Feb. 20, 2015
Credit Card Basics, Credit Cards
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You may feel like cash is burning a hole in your pocket, but plastic can be just as tempting. That makes some people worry about carrying a credit card and spending too much. But here are three good reasons to exert some self control and make sure you always have a credit card on hand.

1. Your debit card may be denied

When you buy something with a credit card, you’re not paying for it with your money – yet. You’re actually taking a small, short-term loan from the bank that issued you the card. Of course, you should plan to  pay the issuer back, but you haven’t exactly paid for your purchase yet.

A debit card, on the other hand, draws money directly out of your bank account every time you swipe. You’re spending your own money on the spot, not borrowing someone else’s.

Using a debit card can be a useful tactic to make sure you’re not spending more than you can comfortably pay back, but this will only work if there’s enough money in your account to cover the things you’re buying. If you just paid your rent or your paycheck hasn’t cleared yet, your card could be declined when you need it most. A credit card is a lifesaver in those situations, allowing you to catch a cab home or make other emergency purchases.

In addition, if your account is hacked, you’re unlikely to be stuck with all the fraudulent charges, whether it’s a credit card account or a debit card. But you have to report the theft sooner if it’s a debit card, according to the Federal Trade Commission.

Either way, it’s possible that your account will be frozen for a few days while the theft is investigated. It can be very inconvenient to have your checking account frozen when you need to deposit a paycheck or pay your rent. Some people feel safer using a credit card, figuring a temporarily frozen credit card account due to fraud is better than a frozen checking account.

» MORE: Why nearly every purchase should be on a credit card

2. Cash could be stolen or misplaced

Imagine this scenario: You’re going out with friends, and you’ve never heard of the bar they’ve chosen. You don’t know the neighborhood, and you may end up taking the bus home by yourself. Would you feel comfortable with a wallet full of cash in that situation? You might be better off carrying a credit card. Money spent on a stolen card can usually be recovered, while stolen cash is almost never returned to its owner. Keeping plastic on hand might make you more comfortable, knowing your money would have some protection in case you were robbed.

The same goes if you lost your wallet, without anyone being at fault. A quick phone call to your credit card company will cancel the card, but you might never see the cash in your wallet again, even if the wallet is returned to you.

3. You could miss an opportunity to earn rewards

Rewards are one of the best things about credit cards. Do you really want to pass them up by leaving your card at home when you find yourself making a purchase? Don’t forget, the way you earn rewards varies depending on the card. Some credit cards offer higher rewards for specific types of retailers, like gas stations or grocery stores. It can be aggravating to find yourself unexpectedly filling your tank and realize you don’t have the card that gives you the best rewards on gas in your wallet.

Remember, the more you use your credit card, the more rewards you’ll be able to rack up. For most people, using it for every purchase possible is a smart idea. Whether your goal is to earn miles for a trip or a score fat cash-back redemption, you’ll get there quickly if you swipe your card wherever you can.

The takeaway: It’s true that some people spend more money with credit cards than they would if they were using cash. But the benefits of keeping a credit card in your wallet outweigh the risks — as long as you have the discipline to use the card wisely.


Virginia C. McGuire is a staff writer covering personal finance for NerdWallet. Follow her on Twitter @vcmcguire and on Google+.

Image via iStock.