Guidebolt

Credit Card

2018.04.15

Credit cards are a modern necessity for their wide acceptance with many businesses (many websites only accept credit cards) and convenience for medium-sized offline purchases (when you don't have enough cash on hand). The best secondary benefits of a credit card are their fast usability (ex. tap and go) and low fraud liability compared to debit cards.

Credit cards typically have a 30-day no-interest grace period (excellent), but incurs the risk of forgetting to pay back in time (then charged high interest fees) and bearing large unauthorized charges up to your credit limit (you may be held personally liable for a portion of the charges).

With prepaid cards, you do not have to worry about interest fees or large unauthorized charges (loss total is limited to the remaining card balance), but your spending is limited to your prepaid balance which typically involves load fees.

Card benefits include store discounts, cash-back, or redeemable points. All card benefits should be viewed from the perspective of how much value you expect to get. The standard for comparison is the cash-back program that yields savings on every purchase. Specific discounts are only valuable if you spend a lot at participating stores. Redeemable points are only valuable if you collect enough points for items at a faster rate than with a cash-back program. We recommend cash-back programs because their expected value is much more certain.

As a user, think carefully about the important process of loading a credit/prepaid card so as to make the payback/refill routine easy, fast, and safe.