This story focuses on one of the most common and important questions relating to your financial future. Should I get and the related question-use a credit card? The answer is not easy, primarily because the thought process is often clouded with so many horror stories of people abusing unsecured credit and getting so far into credit card debt that it seems impossible to get out of it. These negative examples of abuse of credit makes many people just say “NO” to credit cards, or at the very least, that is often the guidance given by others. Like most important decisions it is best to keep the emotions out of the process and to realize that what may be awful for some may, in fact, be acceptable to others like you. Let’s take a thoughtful look at credit cards.

As you get older, you become more in charge of your life and that translates into the decisions you make. You receive less and less direct guidance from others (parents, relatives, etc.) and more connection to you and what you want. Perhaps that is why credit card issuing institutions seek you out and offer you the opportunity to apply for the card. They probably think you can now make buying choices that may include the use of a credit card. After all, as the story goes, credit card loans (that is what they are) means you can get instant credit to buy that special item that may be a very good deal or just what you want when you have no cash. The buy now pay later should not be a prescription for going deep in debt, but an opportunity to have a bit more flexibility as a consumer. For many, however, the buying benefit of credit cards is not connected to the cost of obtaining the credit and paying the loan back. Remember, revolving credit is not free money and the amount borrowed plus interest and fees must be paid back if you want to protect your financial future. 

Assume you have elected to have a credit card from a reputable financial institution-perhaps from where you have a savings account or checking account or debit card. Assume also you are committed not to use the card unless it is absolutely necessary. One day you are walking past an antique shop and see an antique green glass bowl that matches your grandmother’s collection of glassware and it is the item she has been searching for to complete her set. Wow! What a find. You know that granny would love this bowl and her birthday is next week. You enter the shop and chat with the dealer. “Oh yes, this is a special item and it just came in and will most assuredly sell quickly,” says the dealer. Such a find is not cheap and you do not have enough cash on hand to buy it. The dealer sweetens the pot by saying he will give you 10% discount if you buy now, but he can’t save the item for you.

The stage is set. Do you break your own rule and use your credit card for a consumer purchase that by some peoples’ standards is not an emergency-or is it?  In this case, employing the decision making guide will not only help you make a good financial decision, but by answering the questions specific to the story thoughtfully it will also give you the opportunity to determine the value of having and using a credit card intelligently. This reinforces the importance of the guide and will help YOU create a perspective that is yours and may help you later not to fall into the credit card debt trap you have heard so much about.  Because credit card debt is a major problem for many people, be ready to have a lively discussion when you share your views with your peers. Be sure to discuss short term and long term views and how the value of something may change over time. Will grandma have a very special birthday?

Applications Insights Guide - click here for facts to aid your decision making process