What is Credit

What is Credit?

I am not going to waste your time by explaining in detail what credit is. I believe we have all been around long enough to realize the reality of debt. I am also not going to go into specific figures or quote a bunch of useless facts and statistics. What I am going to do is explain what we need with credit and how we should use it properly.

Traditionally speaking most people believe that debt is bad, the fact is that debt used prudently and rationally, can assist the borrower to achieve goals that otherwise would be unattainable. Very few Americans could enjoy their current standard of living without some form of credit. Basically, credit is leverage.

There are good and bad forms of credit. Unfortunately, the greatest misuse of credit is by charging perishables. With proper training anyone can learn to master the good use of credit. For example, it is wiser to use a mortgage to finance the purchase your home than to charge airline tickets for a vacation.



THREE BASIC USES OF CREDIT


Worst — to purchase perishables, such as meals, gas, groceries, airline tickets.

Better — to purchase depriciables, such as automobiles, furniture, clothes…

Best — to purchase appreciables, such as mutual funds, a home, or other investments.

Americans’ reliance on plastic–bank credit cards, charge cards, department store and oil company cards, debit cards and ATM cards is at an all-time high. The average American carries about nine cards, with a balance of many thousands of dollars. With so much plastic floating around, you need to know your rights and responsibilities to protect yourself in the event of loss, theft or even overspending.

Credit Cards have become a major cause of debtors remorse. The old cliche’s “Buy Now and Pay Later!” and “Don’t Leave Home Without It!” have become a normal way of life for most. As our spending and debt grow, so does the lack of what we will have to spend from future earnings. We become spoiled by a lifestyle we really can’t afford. “Keeping Up With the Jones’” has driven us nearly to financial ruin.

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