For many people, this question is about whether to satisfy your longing for instant gratification or to delay it to pay cash. There are compelling reasons to use credit at certain times. However, if you’re prone to overspending, having a credit card can be like carrying a loaded gun. It may seem safe, but they sometimes create bad scenes when you didn’t expect it.
Many people today like to use credit cards with cash back or other types of bonuses instead of cash. By paying off the balances at the end of the month, they rarely, if ever, pay interest. A few times a year they get a check or a voucher that can be used for purchases. Because most people with these cards pay interest every month, they subsidize part of your lifestyle.
The only time this becomes a problem is when you fail to keep good records about the amount you are willing to charge each month. You can end up with a credit card balance beyond your ability to pay it off. Since this will likely bite your budget the following month, you can end up in a situation where you either have a very difficult month financially, or you get locked into paying interest for several months to come.
As a general rule, never buy anything on credit you can eat or burn unless you can pay for it all later. Your food and the gas for your car are both items that people like to buy with credit. Once consumed, they have no future value to help you retire debt should you get into trouble.
On the flip side of this issue is the notion that cash is the only way to buy. Most people break this rule regularly. They buy houses, cars, boats, and furniture on credit. It is not the credit that is the problem, but the unsecured debt. If you only buy big ticket durable goods on your credit card, you will probably never get into trouble.
Even unsecured debt isn’t terrible for shorter terms. If your child needs school clothing, you may have to use credit. Try not to buy anything additional until the balance is eliminated. You will pay some interest, but it will probably be within a reasonable range.
Eventually, if you continue unrestricted charging, you will have to live within your means because your credit will either max out or be reduced by credit card companies. So, learn to do it before your credit is used up. Limiting credit usage on your terms is always better than limiting it on theirs.