Thursday, June 14, 2007

Credit - The irrational fear

Why is it that most personal finance sites advocate the decreased use of credit?

While I understand that some people should not have as much credit as they do, I would assume most people reading PF sites are those who are much more responsible, searching for solutions to life's problems, not looking up ideal situations in hypothetical worlds.

FACT: If you are not personally wealthy, you will not get through life without credit, in some form.

People will always need credit. It's a fact of life. You will never have enough to pay for large expenses that you need, nor necessarily carry around enough cash to purchase any mundane things. Nor should you carry around large sums of cash.

Having a large amount of credit sitting around is never a bad thing. You will always have a buffer for when you need something large immediately, or can't pay for something normal temporarily.

What I do advocate is decreasing the balance you owe on credit when you can, and never charging more than you can afford to pay back when you do use it.

Frankly, I don't buy the excuse that somehow credit card companies have this magical sway over people to convince them they need to spend beyond their limit. When you reach the age of 21, you should have the mental capability to restrain yourself and understand the basics of how credit works.

You don't need to cut up all your credit cards or stop paying for things on credit. Just step up, be an adult, and assume responsibility for your actions!