• Although many financial advisers caution their clients about the pitfalls of debt, using credit products can have positive effects for a consumer. Debt can allow individuals to obtain the funding necessary to pursue their goals, including owning a business or purchasing their first home. While debt can be beneficial, consumers should not take on more than they can handle, as the benefits can quickly turn into downfalls.
  
  

Building a Credit History

• Using credit products to make purchases gives consumers the opportunity to build a credit history that will allow them to qualify for loans for larger purchases in the future. When evaluating an applicant's information to determine whether or not to grant a loan, most lending institutions will evaluate the applicant's credit report, along with proof of income and references. Making payments on time each month will increase a person's credit rating while showing lenders that she has the ability to repay debt obligations and allow her to qualify for additional credit products.
  
  

Emergency and Large Purchases

• Having the ability to access a line of credit provides consumers with a cushion to use in case an emergency situation arises. Even though financial advisers warn their clients not to spend outside of their budgets and to have an emergency fund available, situations arise that may require a large purchase that could not have been planned for and allow customers to make payments on a monthly, manageable basis. Credit cards also provide consumers with the ability to reserve car rentals or hotel stays without placing an authorization hold on the funds available in their bank accounts when using a debit card. In addition, customers can purchase large items such as cars or homes with a credit product.
  
  

Fraud Protection and Rewards

• Customers who use a credit card to make purchases may be protected against fraudulent purchases should the card be lost or stolen. Customers are not liable for purchases made with the card after it has been reported missing. Also, many credit cards offer rewards programs that allow customers to earn points toward things such as hotel stays, airline tickets and store gift cards. Some cards also offer cash back in the form of a credit on a future statement.