Credit cards are the best way to pay for stuff when you use them properly. To keep it simple, a credit card is just a way to make payment, with an option of letting you spend on borrowed money. If you use it just as a way of paying for things, you'll stand to reap a whole universe of benefits and perks. But if you get it wrong, you will have a debt nightmare for years. Many people simply use their cards to borrow money and spend beyond their means, and that's a recipe for financial disaster. The best way to use credit cards is to repay in full by each month's due date so that you don't pay any interest at all. Otherwise, ensure you have a plan and budget for repaying it.

Here are 8 top reasons why you need a credit card.

  1. Earn free money

    Many credit cards give you cash rebates or cash back when you spend on them, and these are cashback credit cards. This is like having a discount when you buy things with your card. Cash rebates or cashback can be in the form of a statement credit, or they can be used to deduct from your purchase at certain participating stores. Why use cash when you can use your card to earn cold, hard cash when you spend?

  2. Earn rewards
    Some cards let you earn points or airline miles which you can later use to redeem for a wide variety of rewards ranging from free shopping vouchers to merchandise and airline tickets.
  3. Get discounts
    Banks partner with many retail stores and restaurants to give you discounts when you use their credit card. You can typically get 10-20% discount at participating stores and restaurants, and even 1-for-1 dining deals.
  4. Earn miles for free flights
    For those of you who love to travel, there's nothing better than getting a free air ticket to your next destination. Some cards let you earn up to 4 miles per $1 spent on your card at department stores or online shopping websites, and when you have accumulated enough air miles, you can redeem them for free flights, hotel stays or merchandise.
  5. Borrow for free
    Some credit cards may offer 0% instalment payment plans for specific products (for example, a mobile phone) or specific stores from time to time. This means that you don't have to pay any interest on that specific purchase if you don't repay in full during the promotional period, which can range from 6 to 36 months.
  6. Free insurance
    Some credit cards offer free insurance, such as travel accident insurance, emergency medical and dental insurance, baggage insurance, car rental insurance and even purchase protection which covers the cost of your purchased item if it gets stolen or lost within a specified period of time (usually 90 days) after you bought it.
  7. $100 liability limit for unauthorised transactions
    Have peace of mind knowing that if your credit card is lost or stolen and is used for unauthorised transactions before you notify the bank about it, you will be liable for a maximum of $100.
  8. It's better than cash and debit cards
    With a credit card, you can slim your wallet by carrying less cash around. Instead of fiddling for cash, just whip out your card for easy payment. Plus, you get to earn free money, free rewards, or get free discounts simply by using your credit card to pay for the exact same item.