Advantages and Disadvantages of Using Credit



Appendix 7.02F Advantages and Disadvantages of Using Credit Allows consumers to purchase expensive items they would not otherwise be able to purchase with cashIf credit rating becomes poor, could impact their ability to get credit in the futureAllows use of goods and services before or while paying for themIf debts not repaid, credit may be damagedCan be used to purchase a variety of goods and servicesTypically pay more for goods and services because of finance charges (interest and fees)Convenient to useCredit not always available because some retailers don’t accept creditEnables consumers to make purchases online and over the telephoneLimits current buying power as income is required to repay old debtsFrees consumers from having to carry cash to make purchasesRetailers increase prices to cover costs associated with accepting credit and paying bad debts Good credit indicates that a consumer is responsible financiallyBad credit indicates that consumers are irresponsible and untrustworthy when it comes to financesHaving the means to pay for emergencies provides a sense of comfortIf debts not repaid, merchandise may be repossessed by creditorsInitially expands borrower’s incomeMust protect credit cards from unauthorized useMakes recordkeeping of purchases simplerMay lead to impulse purchasesUsually makes returning items easierMay lead to overspendingWhen used responsibly, helps establish good creditMay lose track of how much is actually being spent ................
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