What is Responsible Credit Use?

When you use credit responsibly, it means you use credit in a way that fits within your budget. Essentially, wise and responsible credit users budget in the expense of paying down debt. Generally, major purchases or loans such as a mortgage or car loan are purchase that have a lasting value and are budgeted into the monthly budget. However, when borrowing extends to groceries, utilities and other necessary bills but those that have no long term value, then credit trouble can occur.

Responsible credit use is about living within your means. While this has many meanings to different people, the basic notion is that you base your purchases on what you can afford to pay, not simply on what you want. Since credit cards are very convenient, it is very easy to fall into the “If I want it, I’ll buy it,” attitude. However, falling into the mode of always putting expenditures on credit has it’s drawbacks. The main drawback being debt and the potential for financial disaster.

Currently, the average consumer credit debt is about $9000. If you have 18% interest rate and only pay the minimum balance at 4% of the balance, it would take over 14 years to pay off because the interest would accumulate over time. In fact, you would pay over $5,000 in interest rates alone.

What can you buy with that $5,000? Imagine maintaining that balance and you should see that keeping credit debt down is not only a good idea at the present but also for the future. Keeping this in mind and abiding by it is credit responsibility.

Source by Robert Livingston

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