Five Things to Consider Before Purchasing on Credit
According to one statistic, as of November, 2013, Americans owe $856 billion in credit card debt. If you’re like many people, you’ve found yourself in a cycle of spending with credit. This can lead to poor credit ratings and debt. But by asking yourself the following questions, you can move away from a cycle of spending on credit.
#1 Why use credit for this transaction?
Some consumers want to accrue reward points and can pay off their card on time with no balance at the end of the month. This is the best use of credit and should be the only use of credit. If you cannot afford to pay credit in full within the month, you risk accruing debt and lowering your credit score. If you are only making minimum payments, you will also end up spending significantly more on the item you purchased due to fees and interest charges.
#2 What type of transaction is this?
If you need to use credit for essentials, like utility bills, or gas to get to work, it’s probably time to change your lifestyle. Consider carpooling, taking on a roommate or tenant, or finding side work that can increase your income. If you rely on credit to pay standard monthly living expenses and food, it’s time to make a lifestyle change and start living within your means. Many Americans use credit for medical bills. Setting-up interest-free payment plans with medical offices is one solution. If you can’t avoid it, try finding low interest loans from a local credit union to help offset the expense.
#3 Do I believe I’ll have the money at “Some Point In the Future”?
If you believe you’ll be able to pay off your credit “in the future”, you’re thinking may be unrealistic and you may be putting yourself in a bad position to increase debt. Either avoid making the purchase on credit by waiting or make a less expensive, affordable purchase. You never know what the future holds. You may think you will be getting a large tax return this year and can afford to pay your bills then, but maybe you underestimated the taxes you owe. It’s best not to take the chance.
#4 Do I feel like I am “Denying” Myself Something If I Don’t Make This Purchase?
We live in a consumer-based society. But you don’t have to overspend on credit to enjoy yourself. Choose a happy hour at a chic restaurant if you love to go out. Or buy a used technology item if you love to keep up with new technology and gadgets like iPads or new phones.
#5 Is this helping me reach my financial goals?
If you’re honest with yourself, you realize that continuing to use credit moves you away from financial freedom. If you stop yourself in the moment, it gives you time to make a better financially responsible decision. It’s a good idea to plan ahead any large purchases. When you go to the store make a list of things you budgeted for an purchase only those things. Don’t roam aisles and look at the new toys and gadgets. If you window shop, you are more likely to make impulse purchases outside your budget. If you have been an impulse buyer and have issues with your credit, you can visit http://www.lexingtonlaw.com/credit-education/credit-repair-company/ to get tips on how to improve your credit.
By asking yourself these questions, you can break the cycle of spending on credit or stop yourself from going down that path. But using credit responsibly, paying credit off on time, is rewarding and creates peace of mind. By paying bills each month, you can build credit and increase your credit score so you can be ready to make important purchases using credit, like the home of your dreams. Plan ahead and budget responsibly and you will be taking steps towards financial freedom.
Source: http://www.creditrepair.com
Category: Credit
