An important part of personal financial planning is using credit wisely. Credit allows a person to exchange future income for current consumption, that is, buy now pay later. It is important to know that although important to know that although credit increases a borrower's immediate purchasing power, it does not increase income. A person who understands the advantages and disadvantages of credit can often maximise the benefits of credit.
The advantage of credit is that it allows a person to preserve his assets and savings while paying gradually for the goods and services he enjoys. It also provides security by letting a person deal promptly with temporary financial emergencies without seriously draining his assets. Credit makes shopping convenient; credit and charge cards do away with the need to carry large sums of cash.
The disadvantages of credit are just as many. Credit has a high price attached to its user friendliness: interest cost and annual fees for basic and supplemental cardholders. It also causes the loss of use of future income(which is used now as credit) and induces an urge to overspend. in addition, failure to pay the financial institiution or credit card company on time for credits used could result in a negative credit rating that jeopardises the availability of future credit.
Borrowing or obtaining credit is indeed a double-edged sword. For many people, borrowing is necessary for aggressive wealth-building , such as margin trading, real eastate, or starting or expanding a business. The other edge of the sword is the abuse of credit.
The advantage of credit is that it allows a person to preserve his assets and savings while paying gradually for the goods and services he enjoys. It also provides security by letting a person deal promptly with temporary financial emergencies without seriously draining his assets. Credit makes shopping convenient; credit and charge cards do away with the need to carry large sums of cash.
The disadvantages of credit are just as many. Credit has a high price attached to its user friendliness: interest cost and annual fees for basic and supplemental cardholders. It also causes the loss of use of future income(which is used now as credit) and induces an urge to overspend. in addition, failure to pay the financial institiution or credit card company on time for credits used could result in a negative credit rating that jeopardises the availability of future credit.
Borrowing or obtaining credit is indeed a double-edged sword. For many people, borrowing is necessary for aggressive wealth-building , such as margin trading, real eastate, or starting or expanding a business. The other edge of the sword is the abuse of credit.
