There are three ways credit can be described – The Good, Bad, and Ugly. The currency of choice when making purchases in todays society is credit. Many has the mistaken notion that cash is king. If cash is king, Credit is the Czar! I can’t count the number of times I made purchases for goods or services and cash was never a part of the transaction. The king was AWOL! The Czar, however, was there making it happen.
Using credit is GOOD when the purchased asset appreciates, such as a house. You can readily see that the odds are in your favor of getting a return on your purchase as time passes.
Using credit is BAD when the purchased item depreciates, such as a car. Not the worst use of credit, but, certainly not the best. You still have time on your side. Assuming the car is taken car of and you keep it until it is paid off then drive it for years after. The point is to keep the car long enough to enable you to save for future needs.
The use of credit gets down right UGLY when used to purchase consumable goods, such as food and gas. There is no chance of a return on what has been spent! Certainly in the case of last nights steak dinner, you literally flush your money down the toilet.
If the purchase were made using the favored form of credit (VISA, MasterCard, etc), it could take 30 years to pay for something you kept for about 24 hours! This is no exageration! If you make the minimum payment offered by the credit card companies, it will literally take you 30 years to pay off the debt. I have done the math and proven the calculations. We are handing our financial future to our creditors in the form of interest payments.
