What
is credit?
A
promise to repay a debt for goods and services. Credit is using tomorrow's
money to pay for something you get today. It is not a bad thing. In fact it
can be very good - unless you do not use credit properly. Without credit,
many of the things we need would be unaffordable to many of us.
Advantages and Disadvantages
Credit
has both advantages and disadvantages. By using it wisely, you can accent
the advantages.
Advantages
·
Ability to buy needed items now.
·
You don't have to carry cash.
·
Creates a record of purchases.
·
More convenient than writing checks.
·
Consolidates bills into one payment.
Disadvantages
·
Higher cost of items (interest and finance
charges)
·
May include additional fees.
·
Financial difficulties may arise if one loses
track of how much has been spent each month.
·
Provides the avenue for increased impulse
buying.
Costs
of Borrowing
Credit costs money! Try to pay off your credit card each month. If you can't afford to pay off your credit cards each month, make the largest payment you can afford, and pay the card off before you make another purchase. You'll want to shop around for any credit. Check out Bankrate.com for the best credit card rates. Picking the right credit card can save you money. Look at the various sources. Be sure to read the contract carefully. As with any loan or service, it's better when you don't rush it. Know the penalties for missed payments; compare annual percentage rates, grace period, annual fees, transaction fees (such as cash advance, late payment and over-the-limit fees), and balance computation method for the finance charge. Also, know what features are offered, such as credit limit, special services, and how widely the card is accepted.