Be Wise in your Use of Credit

To be totally honest, credit is not only convenient, it can even be necessary. Many of us keep a credit card or two in our wallets for essential purchases or emergencies, such as a blown tire that must to be repaired immediately but we don't have the cash on hand. Credit cards can also save money on purchases by allowing you to spontaneously take advantage of special offers and sales – but only under the proviso that those sale balances are quickly paid off before the advantage of the sale price is lost through accrued interest and other fees.

Planned credit is indeed indispensable for strong financial health. In the form of a positive credit rating, it enables you to acquire assets. It communicates to lenders, insurance companies, and even to prospective employers that you're a good credit risk and that you discharge your personal affairs responsibly. When you apply for a mortgage on your first (or next) home, your lender will not have to guess whether or not your payments will be made on time – your track record will speak loudly for you. And when you need insurance on your home, car, or personal belongings, your credit standing will inform the insurer that you're not a bad risk, and you are not likely to try to cheat the system. A prospective employer viewing your credit report will generally be assured that you won't lose much time due to work absences, and that you're likely to keep your promises on the job as well as you've done with your creditors.

On the flipside (yes, there's always one), you must be very careful with your use of credit, because available credit encourages impulse purchases, and this is precisely the problem that millions upon millions of people currently face. With costs and interest rates constantly climbing, the accumulation of unplanned debt can be a significant (and sometimes disastrous) drain on personal resources, making it extremely difficult – if not altogether impossible – to build and sustain any savings or assets.

When you're wise and prudent in the use of credit, you maintain firm control of your financial future instead of falling into servitude to creditors. Indeed, the intelligent use of credit can enable you to effectively negotiate with lenders and other credit issuers to obtain their best terms and conditions for your current and future financial benefit. You can expect to receive credit on the best available terms as you consider your housing, education, investment, or retirement needs. You'll also have at your disposal one or more sources of ready funding should you need it to help stabilize any temporary cash shortfalls or time lapses in your earnings.

The key, then, is not to avoid credit, but to make judicious use of it. So before you use your credit card for any reason, simply ask yourself if the purchase that you're considering is something that will benefit you more than the acquired debt may harm you. Make absolutely certain that you think through your buying decision, and don't fall prey to the trap of making a credit purchase just because the card is there for you to use.

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