When Should You Not Use Credit?

In today's credit-conscious society, there are times when you should not buy things with plastic. Here are some of those scenarios.

Decades ago, it used to be that credit purchasing privileges were reserved for the rich and famous. While farmers, miners, and other small blue-collar communities could buy "on credit," large-scale purchases were made primarily by cash.

Not anymore. Today, it is rare to meet someone who does not use a credit card. Many people have several. The down side of this development is that with the easy access to credit card use, consumer debt has mounted significantly, with some hapless victims running tens of thousands of dollars into debt that may be difficult to escape without incurring bankruptcy.

If you have a credit card or are thinking of getting one, here are a few guidelines to consider in making purchases.

1. Don't charge if you can't afford to pay it off in one statement cycle. For many middle-class consumers, the limit might be an amount in the range of a hundred dollars. Charging a more expensive item could impact your monthly budget if you strain to pay it off, jostling existing obligations. Or you may be tempted to make several monthly payments instead of paying the balance in full with the first statement. Check your credit terms to see if interest accrues from the date of purchase or when the first billing cycle (usually 30 days) ends.

2. Don't charge if you don't need it. "Make do or do without" is the motto of some thrifty people. A "needed" charge expense might be an unexpected car repair or a veterinarian bill, though a healthy budget includes savings for items like these. A new dress or shirt along with a visit to a classy restaurant are not true "needs" for most people. Pause before pulling out the plastic to determine if this purchase is worth the eventual wear and tear on your wallet.

3. Don't let someone else use your charge card. Even well-meaning friends or family members can get careless about paying back a charge on someone else's account. The old saying "business and family don't mix" particularly applies to a credit situation. Keep your card to yourself.

4. Don't buy something just because it's on sale. Those 50 percent off signs are like magnets, pulling us in against our will. A lower price doesn't necessarily mean you need to rush out and buy something on discount. Consider it only if you have been planning the purchase for some time.

5. Don't charge presumptuously. "I'll pay it off with the income tax refund." Sometimes expected windfalls blow the other way. You don't want to get stuck with a large debt and no way to pay it off. If you plan to buy something using a special or one-time income, wait until you have the money in hand. It's safer that way and you'll have peace of mind.

6. Don't be pressured into charging a purchase. Guilt, joy, forgetfulness, or empathy can cause us to want to run out and buy something for another person that they may not need and we cannot afford. The resulting charge will only make you feel worse when the statement comes in the mail.

Credit cards can convey a sense of financial power and well-being. But the mature consumer will control his spending and credit card use before it takes control of him. If you are having trouble limiting your credit purchases, meet with a financial adviser who can help you set limits.

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