When would someone use credit?

When Credit’s Your (Reluctant) Best Friend: A Love-Hate Relationship

Okay, let’s be real. Credit. The word alone can send shivers down my spine. Debt? Forget about it. It’s like a monster lurking under the bed, waiting to pounce on your finances. But, as much as I despise the idea of owing someone money, I have to admit, credit can be a necessary evil. It’s a tool, and like any tool, it can be used for good or bad.

For me, the most glaring example of when credit becomes almost unavoidable is emergencies. Picture this: Mittens, my ridiculously fluffy Persian cat, suddenly starts acting weird. Turns out, she needs emergency surgery. The vet bill? A whopping $3,000. That’s money I simply didn’t have readily available. Without a credit card, I don’t know what I would have done. I shudder to think of it. In that moment, credit wasn’t about buying a fancy new gadget; it was about saving my cat’s life.

Beyond emergencies, think about major life purchases. Let’s be honest, who can afford to buy a house outright these days? According to the National Association of Realtors, the median existing-home sales price in March 2024 was $393,500. Unless you’re sitting on a mountain of cash, a mortgage is pretty much the only way to achieve the dream of homeownership. It’s a massive undertaking, a gigantic commitment, and frankly, terrifying. But, the idea of having a place to call my own, a space to build memories… well, it’s a powerful motivator to face that fear and take on the responsibility of a mortgage.

But here’s the thing, and it’s a big thing: building good credit is absolutely vital. It’s like a financial superpower you need to unlock. Think about it – a good credit score (generally considered 700 or higher) opens doors to lower interest rates on loans, better insurance premiums, and even apartment rentals. Experian, one of the three major credit bureaus, even highlights that good credit can impact things like getting approved for a cell phone plan or securing a job. That’s huge!

However, and this is where the love-hate relationship really kicks in, responsible use is paramount. Credit cards can be tempting. “Oh, I’ll just put this on the card and pay it off later.” Before you know it, you’re drowning in debt with sky-high interest rates, and that dream house suddenly feels a lot less dreamy. The average credit card interest rate right now is around 20% (according to CreditCards.com). That’s insane! Paying only the minimum each month can literally cost you thousands of dollars in interest over time.

So, when should someone use credit?

• For true emergencies that you can’t cover any other way. Think health crises, car repairs that are vital for getting to work, or unexpected home repairs.
• For necessary investments in your future. This could be a mortgage for a house, a student loan for education, or a small business loan to start your own venture.
• To build credit responsibly. A credit card used strategically (small purchases you can pay off in full each month) is a great way to establish a positive credit history.

Ultimately, credit is a powerful tool. Used wisely, it can help you achieve your goals and navigate life’s unexpected challenges. But, used carelessly, it can become a financial nightmare. The key is to be mindful, disciplined, and always, always prioritize responsible repayment. Because the monster under the bed? It’s definitely real, and it’s called debt. And trust me, you don’t want to mess with it.

#Credit #Finance #Loans