by Joseph Kenny | 10/19/08

It's easy to waste a lot of money on credit cards, getting sucked into a vortex of high-interest debt. However, if you use them right, credit cards can actually be quite a boon. Credit cards can increase your credit rating, help you insure rented cars, and give you all sorts of free benefits and rewards for using them-such as plane tickets and gas at the pump.

Credit card companies make money because most credit card users rack up a large balance on their credit cards, and don't pay it off in full. The interest rate on credit card debt is very high-typically around 12-15%. Credit card companies already make money from all credit card transactions by charging the merchants a 3% fee. However, this is a small amount indeed compared to the interest that can accrue to partially-paid consumer credit card debt.

At the same time, most people aren't aware of the benefits and rewards their credit card companies offer. Or, they know about the rewards, but don't bother to collect on them. As a result, credit card companies can entice potential customers with promises of rewards-such as grocery rebates and frequent flier miles-and then reap big profits when the customers turn out to be too lazy to take advantage of the rewards in question.

However, if you are a smart consumer you aren't like this. Here are some benefits you stand to gain, having successfully avoided the above-described pratfalls of credit card ownership.

First of all, regularly using your credit cards actually improves your credit rating. Regularly making credit card payments while using less than 30% of the available limit, is the easiest way to quickly boost your credit rating.

A credit card, or rather, the credit card company that issued it, an invaluable ally if you're ever involved in a disagreement about payment with a merchant or business. For example, say you buy a product from a store, but the product turns out to be broken or defunct. The store hasn't given you what you've paid for. Yet, the store's employees have no reason to cooperate with you. They can be uncaring, rude. That's where your credit card company comes in. Your credit card company is legally obligated to look into these matters. If the merchant has, in fact, charged you for an useless or broken product, your credit card company will redress the wrong.

Another advantage of credit cards is that they offer an easy way for consumers to pay their bills automatically. That way, you don't have to keep track of when you need to pay all your bills yourself. You should pay off the full balance on these credit cards immediately, so that you don't rack up interest, of course. Fortunately, it's usually possible to set up credit card to do this automatically as well.

Credit cards are also, in some ways, safer to use then debit cards, checks, or other methods of payment that involve giving out your actual bank account number. Why? If a criminal gets his or her hands on your bank account number, you're in trouble. The criminal can proceed to take all your hard-earned money out of your account. With a bank account, you're dealing with real money, rather than credit. Consequently, there aren't many options for getting that stolen money back. By contrast, if someone steals your credit card number, all you have to do is call your credit card company no more than 60 days after you receive a statement indicating theft has occurred.

These are but a few of the advantages of credit cards. Other advantages include extensions on manufacturer's warranties included with some credit cards, as well as various rewards programs, and insurance if you're renting a car.