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While the irresponsible use of credit cards can cost you dearly by putting you deeply in debt, a credit card, if used wisely and correctly, can be a welcome addition to anyone’s wallet.

First and foremost, a credit card is an invaluable tool in establishing and building a credit history. It is essential to have a good, sound, lengthy record demonstrating your ability to use credit responsibly if you ever plan to own a home, a car or your own business at any point in the future. Even if you haven’t even begun to think about those things yet, you can begin to establish a good credit history. Your credit report could potentially influence an employer’s decision whether or not to hire you, your insurance rates as well as whether or now you can borrow money for things like a post-secondary education. Obtaining a credit card is an excellent and necessary first step to establishing a positive credit score. Aside from your Social Security number, your credit score is perhaps the most important number of your financial life, as it influences a wide variety of payments. It can save you money or cost you money, depending on how meticulous you have been in your efforts to cultivate a high score.

A credit card is necessary in a number of different situations. If you want to rent a car, for example, or a piece of equipment. In those cases, a portion of your credit limit on your card functions as a deposit until you return what you have rented. While it is possible to use a debit card to rent something such as a vehicle, because the amount needed for the deposit is “frozen” until the end of the rental contract, it is much better to use a credit card where you will likely not notice that a portion of your available balance has been temporarily tied up – as opposed to a debit card where a deposit is secured by actual funds from your checking account.

Credit cards also come with a certain degree of merchant protection, particularly when buying items off of the internet. Should you purchase something online and the seller does not deliver as promised, if you paid for the item with a credit card you stand a very good chance of being reimbursed for the money spent. Also, the credit card company will do most of the necessary legwork involved in obtaining a refund. You simply have to call up your credit card issuer and dispute the charge in questions, and they will launch an investigation. Should your creditor conclude that you are entitled to a refund, they will issue a chargeback.

There are also a myriad of perks that come with having a credit card account – from rewards points to free rental insurance to free bag check on airplanes to extended warranties, a credit card account can provide you many additional benefits that you won’t get when using cash. Also, credit cards help you track your purchases and provide a record of where you are spending your money.