Acceptable Uses Of Credit

Written by Paul Richard - Institute of Consumer Financial Education, Executive Director

• Home mortgage
• Automobile
• The purchase of an item that will long outlast the period of debt incurred to buy it, and that in addition lowers other costs. Example: using credit to install storm windows and insulation in your home, which in turn lowers heating and cooling costs.
• When the purchase is a necessity and not a luxury.
• When it costs no more money to charge.
• When it helps your income tax return.
• When you may need protection on a repair or a purchase (auto, appliances, mail order).

When Credit Cards Are Bad

• Constant temptation to OVERSPEND.
• Nonessential items purchased.
• Impulsive spending increases.
• Payments are late or only partially made
• Facing bankruptcy.

When Credit Cards Are Good

• Good identification (required for cashing checks and most car rentals).
• Safe substitute for cash.
• Automatic record keeping.
• Consolidates many purchases into one payment.
• Saves money when you can take advantage of a good sale.
• Orders can be placed easily by mail or phone.
• You have leverage against the merchant when a problem arises. Your dispute/claim will get prompt attention when the merchant knows your payment can be delayed or disputed.