Is Credit a good or a bad thing?
Credit....is it a Good or Bad thing?
The holiday season is here and the majority of us are undoubtedly using our credit cards for a lot of the purchases we are making, so the question becomes are credit cards and credit as a whole a good or a bad thing?
My thoughts and my opinion is that credit in all forms is a BAD thing but one that banks, businesses and our society as a whole has made almost impossible for us to live without in one form or another. Credit boiled down to it's simplest form equals debt, plain and simple. Good credit gives you the power to accrue debt for something that you would otherwise be unable to purchase because we don't have the money to do so. The number of people defaulting on mortgages, credit cards and loans in general is at an all time high and all of this debt that households across America have accrued is the result of credit.
Now, I am not stating that we are all victims of the big bad banks and business because we all willingly entered into a binding agreement with these companies knowing up front what the rules were and we chose to make the purchase anyway. However, not to long ago,(the following comparison is made tongue and cheek) organized crime in our country was very real and very powerful and one of their biggest rackets was loan sharking. The practice of loan sharks is one that lets people borrow money with the understanding they will pay it back plus interest. The interest on these loans was extremely high and failure to pay resulted in things much worse than foreclosure or repossession however the premise is exactly the same as credit card companies, is it not?
So what if we all decided, to hell with credit ratings, credit cards and the practice of loans all together? Well the result would be that we would be unable to rent a vehicle, book a hotel room, purchase anything on the internet, we would have to pay cash for everything, including cars, houses and so on. Well, the vast majority of us certainly cannot afford to pay for all those things up front in cash so credit becomes a necessary evil and we become beholden and indebted to banks and businesses.
The moral of this story is that we must become more fiscally conservative. What inevitably happens is that we as a society either make minimum payments or default all together because we cannot afford that which we have purchased. By becoming more fiscally responsible we can begin using credit to our advantage for those bigger purchases such as homes and cars those of which very few people have the means to pay cash for. The rest of the stuff you have the cash for, put the money aside for 50% of it and charge it, the rest pay cash for. Obviously, the 50% you charged you will pay off immediately once the bill arrives but charging it is necessary in order to keep your credit active and in good standing.
In the end, credit is necessary for the world in which we now live but it needs to be treated with caution. I write this as a person who has had his share of financial difficulties and understand what a lot of people are going through in this struggling economy today. I hope you have found my opinions insightful and helpful.