The majority of Americans use credit in one form or another on a daily basis. These transactions are easy and most people don’t put much thought into whether they should use credit.
Buying now and paying later has resulted in serious financial difficulties for many people.
“Being aware of the advantages and disadvantages of credit will help you to become a more informed consumer when making purchasing decisions,” said Doug Scotten, a Family Financial Education Specialist with University of Missouri Extension.
The advantages and disadvantages of using credit are as follows:
Advantages include
• Goods and services can be used while you are paying for them.
• Delaying payment for some purchases will give you a greater share of your income to use for other purposes.
• Many credit transactions are more convenient and safer than using cash.
• Credit can be helpful in short-term emergencies.
• Using credit establishes your credit record.
Disadvantages include
• It is easier to spend and harder to resist impulse purchases.
• Delaying payment decreases the amount of future income available to spend.
• Using credit means extra costs. Finance charges, interest, and fees.
• By using credit, you may not shop around for the best deal.
• Misuse of credit leads to a poor credit rating.
The advantages and disadvantages of credit are expanded on in the University of Missouri Extension publication, “Credit in the Family Budget,” GH3341, available online at http://extension.missouri.edu.
For more information on issues related to home finances, contact Doug Scotten at University of Missouri Extension, Vernon County, located at 100 West Cherry, Suite 2, Nevada, MO 64772. Telephone (417) 448-2560 or email at scottend@missouri.edu.
Advantages and Disadvantages of Credit
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