NEW YORK (MainStreet) — Some budget-conscious consumers believe cash is king and true financial stability comes from avoiding credit cards altogether. And it's true counting cash can be a great way to stick to a budget, but credit cards aren't all bad. Experts weigh in on the top five ways carrying a little plastic in your wallet — and using it responsibly — can work to your advantage.
1. Credit cards are convenient.
"Having a credit card is a convenience — you don't have to carry large amounts of cash and risk losing it or getting robbed, you can buy things on sale before payday, and you can charge things like airline tickets and rental cars," says Gail Cunningham, director of media relations for the National Foundation for Credit Counseling.
Credit cards are also useful when it comes to making big-ticket purchases such as appliances or new tires, Cunningham says. Credit cards allow you to work major purchases into your budget over the course of a few months and avoid carrying excessive amounts of cash to the store.
When it comes to paying bills, credit cards can be used to set up automatic payments for things such as your cellphone bill or cable bill, says Gerri Detweiler, director of consumer education for Credit.com.
If you've never had a credit card before and are worried about being responsible, Detweiler recommends opening a major credit card and setting up one recurring bill on autopay using that card.
"Then lock the card away in your safe deposit box, for example, or freeze it in a bowl of water, so it won't be easy to use. Just pay that one bill off in full each month, and you'll build credit without going overboard," she says.
2. By using credit cards, you build a credit history.
While it's true you can build credit without a credit card, it will be a challenge, Detweiler says.
"One of the factors credit-scoring models look at is your mix of credit accounts, and having different types of accounts including a credit card can help," she says.
Unfortunately, it's not enough just to open a credit card – secured or otherwise – and sit on it, says Quizzle.com CEO Todd Albery.
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"Use your card at least once a month to make small purchases and pay it off in full, on time, every time," Albery says.
Also, keep in mind that you don't have to carry a balance to build credit, says Greg McBride, Bankrate.com senior financial analyst.
"Credit cards help you establish credit because that purchase you make today and pay for later is a credit transaction — but you don't have to carry a balance. Paying the balance in full when the statement comes at the end of the month is the best way to go from a financial standpoint," McBride says.
If you don't see the importance of having a "thick and positive" credit file, you will as soon as you decide to make a big purchase such as a house or car, Cunningham says. "One of these days you're going to be thankful you have several open and positive lines of credit."
3. Depending on the card, you can earn rewards.
From air miles to cash back, many credit cards offer consumer rewards. Every card is different: While some may offer double reward points for such as gas and groceries, others may offer a bonus batch of air miles when you apply. Read the fine print closely to make sure you're getting the card that's right for you.
With that said, don't open too many cards just because you're attracted to the rewards, McBride warns.
"If you are diligent about living within your means and paying your balance in full, rewards credit cards give you money back for purchases you make anyway — you truly get something for nothing," he says.
Also see: 5 Things You Didn't Know About Opening a Store Credit Card>>
4. When you use credit cards, your money has extra time to work for you.
When you use a credit card, don't think of using it to buy something you can't pay for right now. Instead, think of it as the method of payment you're using so your money can keep working for you, McBride says.
"That's the idea with credit cards. Buy something today, and then between now and when your statement comes in – which is between one and four weeks — your money works for you," he explains. "Your money is in the bank earning interest."
Even though interest rates aren't spectacular, McBride says it's about the impact of getting "a free month on a few thousand dollars, and doing that month after month, year after year."
"That cash in your pocket? It's not working for you," he says.
5. You can keep track of your expenses
When you use a credit card for your purchases, at the end of each month, the statement offers a record of what you've spent and where you spent it, McBride says.
"There's a huge benefit to being able to track all your expenses. You can see them at month's end, and it's a great way to track where your money is going," he says.
If you sign up for online bill pay, you don't have to wait for the statement to come in the mail at the end of the month — you can track your spending week by week, or even day by day if necessary.
"People who use credit cards could track their spending by year if they wanted to. Hang onto your statements or check them out online to see long term spending habits, good or bad," he says.
— By Kathryn Tuggle