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When it makes sense not to borrow

By Kemberley Washington · Bankrate.com
Thursday, April 25, 2013
Posted: 3 pm ET

Do you find yourself charging your lunch daily? Do you finance your wardrobe via credit? If you depend on a credit card to simply make ends meet consistently, re-evaluate your finances.

Making daily purchases using credit cards not only drives you deeper into debt, but also makes every single purchase costlier in the long run.

Think twice about discounts

Sometimes, it can seem like credit card companies are trying to fool you into saving by spending. When you go into a store or shop online, there is bound to be an offer to entice you to apply for credit.

From an in-store discount to free travel mileage, the end result is the same -- you increase your debt.

Some insist that paying the bill fully and within the promotion period keeps you from worrying about finance charges and other penalties that may apply. If this works for you, no problem!

But consider this: Nearly 34 million Americans admit to paying their credit cards late, and more than half missed paying altogether, according to a survey conducted by the National Foundation for Credit Counseling.

Do things differently

Instead of running up your credit card debt, take a different approach. For starters, re-evaluate your daily expenses to determine the areas where you can cut back to reduce your reliance on plastic.

If you are not disciplined enough to pay off your cards fully and on time, just say "no" to credit offers that tease perks and discounts.

Instead of using your credit card, save up money for large purchases. Do not buy something until you have the cash to pay for it.

You may love those fancy high-tech gadgets, like the latest smartphone. But buying them new is costly, and it becomes even more expensive if you finance a purchase through credit card debt. Instead, consider purchasing slightly used items to save money.

Before swiping your credit card, always determine whether it makes sense to borrow.

Remember: your choice, your future!

Kemberley Washington is a certified public accountant and business professor. She writes a personal finance blog at Kemberley.com. Follow her on Twitter and on Facebook.

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1 Comment
TJ
April 26, 2013 at 12:26 pm

It only makes sense to borrow on a credit card in an absolute emergency (e.g., need to buy a plane ticket to see your mom on her deathbed).

Credit card interest rates are unbelievably high because they have to cover the cost of all the theft and defaults. So it makes no sense to carry debt on a credit card unless you plan on defaulting yourself.

If you have the discipline, you can use a credit card for ease and float. Buy stuff on it now, then pay the balance in full when the bill comes. If you don't have that discipline, cut up all your credit cards except one (for use in real emergencies).

And remember, Xmas gifts and that new flat-screen TV you always wanted are NOT an emergency.