Buying on credit has become extremely popular and common, and people all over the country are using their credit cards and other lines of credit to make major purchases. The problem, though, is that many people find that they are unable to pay the accumulating interest rates and make payments on their purchases months and years down the road.
Because of that, there are several important things you need to take into account when buying on credit, and what you can do to improve your finances with credit cards and other lines of credit for purchases.
Make Sure You Can Afford It
This may sound obvious, but it is critical that you are able to afford whatever it is you’re buying. The benefit to buying on credit, of course, is that you don’t have to pay today for what you purchase. However, you will have to eventually pay that back, whether you admit it to yourself, or not!
So know that whatever you are purchasing is affordable and can reasonably be paid back in a short amount of time. If you only buy what you can reasonably pay back, it’s difficult to run into problems buying on credit.
Know The Payment Plan
In addition to knowing the cost of the good you are purchasing, and making sure that you are able to buy it with your savings, understand the payment plan itself. If the payment plan calls for large monthly payments that you can’t afford for the next several months, the plan probably isn’t for you.
Understanding the payment plan will allow you to adequately determine if what you want to buy can reasonably be bought and accounted for come pay day.
Remember The Payment Plan
This sounds silly, but it’s critical. When you make a big purchase, remember that you made the purchase down the road! If you buy electronics equipment on credit this month, you may not be able to get furniture on credit next month.
Understand that what you buy now will affect your future purchases, as you may be paying your way out of a hole for quite some time.
Sign Only When Comfortable
Credit purchases often come with contracts and payment plans, if buying on a store’s line of credit. Understand the fine print, and make sure that what you are purchasing can reasonably be paid back – interest and all – before you agree to the contract or sign on the dotted line for a credit card. Once you sign, it may be too late, so know the specifics on the front end!