4 ways Americans use credit cards to purchase and plan for the future

Credit cards are a ubiquitous part of American finances as individuals seek ways to gain financially for the present and future.

Regardless of age or income, credit card use is customary in the United States. In 2023, 82% of US adults had a credit card, according to the Board of Governors of the Federal Reserve System. 

Some people use credit cards and pay off the balance each month while others build up substantial credit card debt and carry a balance with a significant amount in interest.

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Although there is substantial debate regarding whether credit card use is beneficial or detrimental to one’s financial well-being, the 82% who chose to open a credit card for one reason or another believed it would have a positive impact on their financial state.

Whether you are considering opening your first credit card or are looking for ways to make use of your well-swiped plastic, knowing why and how they are used by those who believe credit cards are profitable for financial success can help.

Here are some of the ways that eight in 10 adults who own credit cards use them:

Many credit card companies provide incentives like earning cash back or accumulating bonus points and travel rewards on purchases. With each use of the card, you're rewarded according to the card's terms. These purchases typically cover everyday expenses, such as groceries and fuel. The more you spend, the more rewards you can rack up.

However, only spending within one’s means has proven harder than ever with credit card use.

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Americans' credit card debt has soared to a staggering $1.13 trillion, as reported by the Center for Microeconomic Data's Quarterly Report on Household Debt and Credit. On a personal scale, Experian notes the average debt per borrower stands at $6,501.

Is financing a ski trip or tropical getaway with a credit card a good option, or should you fund it from savings?

Some credit card companies offer incentives for specifically using their card to book travel. Depending on which credit card you have, you can accumulate a certain amount of travel points by booking with the card. 

Choosing a credit card with an airline can increase the rate at which you earn points. If the airline is a member of an alliance, such as Star Alliance, SkyTeam or Oneworld, those points can be redeemed with an airline included in the alliance, according to nerdwallet.com. 

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The rate at which points are collected, however, is relatively low, and it can take a while to earn enough points for the free travel credits. 

"For most cards, every dollar you spend equals one travel mile. But when you’re trying to redeem them, each mile is worth about a penny, depending on the kind of card you have," says the Ramsey Solutions website. 

The allure of a free flight may lead to overspending to earn the needed points. Additionally, paying for a trip that you wouldn’t be able to fund with your current savings can lead to financial havoc.

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One strategy that consumers take to earn rewards is to automate recurring payments with the credit card. Subscriptions, memberships and payment plans can all be set up with monthly withdrawal from the credit card.

The danger is the allure of introductory offers and trial periods. The consumer will be at a disadvantage while the company profits if they complete the initial sign-up process, forget about it and don’t track expenses on the credit card. 

A primary reason that some individuals open a credit card is for business expenses. This strategy helps them separate personal and business spending for easier tax preparation.

Business owners frequently receive rewards and offers for small business credit cards, enticing them to pursue their dreams with the promise of profit. 

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Business owners should read the fine print carefully before jumping in. In many cases, they are expected to pay off the credit card balance within the introductory period to avoid steep fines and interest rates. Additionally, there is often a required minimum amount that must be spent on the card within this period to qualify for the card’s perks.

Small businesses are also enticed with credit cards because of the ability to earn rewards specific to business needs. Some rewards start to accumulate right away, such as cashback offers, and others require a minimum amount spent to qualify. 

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A consideration to make before maxing out your business’ credit card is that sales and consumer trends tend to ebb and flow. Using a credit card to pay business expenses and benefit from the perks is a great plan as long as everything is going perfectly, Dave Ramsey explains on his talk show. The talk show host describes this risk as "playing with snakes."