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One dollar of every three dollars of consumer debt is in credit cards.
Credit can be a valuable resource when used wisely. Used unwisely, it
can become a threat to financial security if today's purchase becomes
tomorrow's problem.
Credit provides a convenient way to
- pay for goods and services,
- take advantage of sales and large
purchases,
- handle financial difficulties,
- use goods and services while paying
for them,
- raise your standard of living
without waiting to purchase goods and services,
- establish a credit rating,
- consolidate debts,
- stimulate the economy,
- protect against fraud,
- and it often provides free collision-damage
waiver insurance when renting a car.
Using credit also has disadvantages
- Impulse buying is encouraged.
- Credit costs money.
- Credit commits future income that
may be needed for necessities.
- Credit makes it easy to overspend.
- Things may be bought that would
not be purchased if one had to pay for them with cash.
- Credit tends to discourage comparison
shopping.
- Credit terms and contracts may
be hard to understand.
- Many consumers have no idea what
interest rate they are paying or what fees they are being charged.
- Consumers who do not shop and
compare credit card costs may pay much more than necessary for credit.
- Credit cards are often used
only to take advantage of the card's perks.
- Buying on credit may result in
the loss of merchandise and/or income if payments are not made on time.
- Items purchased may not last as
long as it takes to repay the debt.
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