Thursday, May 31, 2007

A Simple Guide Use Credit Card Wisely

Credit means committing future income to pay for present needs or wants.

Reasons for Using Credit:
Worst - to purchase perishables such as meals, gas, and groceries.
Better - to purchase depreciable items, such as automobiles, furniture and clothes.
Best - to purchase appreciable items, such as retirement funds or a home.

Advantages of Credit:
Immediate satisfaction of needs.
Take advantage of bargains or sales.
Making monthly payments can create good habits.
Establish a good credit rating.

Disadvantages of Credit:
Encourages impulse spending.
Tendency to buy higher priced merchandise.
Ties up future purchasing power/ability to handle emergencies.
Credit charges increase costs of purchased goods.
Easy credit" can lead to financial difficulties.

Before buying on Credit, ask yourself:
Do I need it now?
Is the interest cost reasonable?
Can I make these payments without skimping on necessities?
Is my income prospect good?
Can I buy it without committing an anticipated increase income?
Do I have an emergency fund to take care of unforeseen expenses?
Is my credit good enough so that I can borrow in case of illness or emergency?
Am I always honest with spouse, self or others about my expenses?