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About Credit
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Lenders extend credit to allow us to buy things we otherwise could not afford. Interest is the price we pay for the privilege of borrowing that money.

Credit and debt go hand in hand. If there were no credit, there would be no debt.


 

Credit comes in many forms:

  • A mortgage to buy a home or property
  • An installment note to buy a car
  • Credit cards to buy virtually anything from lunch, to clothes to vacations, etc

Credit is dangerous because:

  • We spend 12-18% more with plastic than cash. Spending cash causes a physical pain response in the body which is virtually non-existent when using a credit card.
  • It tricks us into thinking we can afford something we cannot… because we can "afford” the payment.
  • It allows us to indulge in impulse purchases—things we later may not want!
  • Everything purchased with borrowed dollars costs more since you must pay back principal + interest.

The proper way to use credit cards is to pay off the balance IN FULL each month.

It does not make sense to finance any purchase that will not increase in value.

<NEXT:  The Truth about Credit Cards>

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