In today’s society it is only natural for people to have bank loans for houses, vehicles, furniture and trips. Your salary is not enough to enable you to purchase large items outright, so you have to negotiate loans and make monthly payments. In return, the lender will charge you interest on the amount you owe in return for allowing you to use his/her money for your benefit. Even though everyone strives to save money to pay for what they need, this is not good either. A healthy balance is using credit cards when you need to and not maximizing the entire balance and of course making your payments on time.
Surprisingly enough, if you do not borrow any money or use credit cards, but pay for everything you buy, you will be denied a loan at a bank or from other lenders. Because you pay in cash, you do not have any credit history for them to base a decision on. Therefore, it is good to have loans and credit cards. The secret is to use them wisely.
Many people use their credit cards for everything they need – groceries, clothing, gas, gifts – because of the incentive of air miles. The key to this is to use the credit card for everything you need and pay the balance in full at the end of the month. In this way you will avoid paying the interest charges on the unpaid balance and still enjoy the benefit of the air miles. If however, you buy everything on the credit card and only make the minimum payment at the end of the month, you will soon have all the credit used up and a much higher monthly payment, with higher interest charges.
Everyone encounters times when it is difficult to make payments. However, every effort must be made to make the payments on time. A reference to one or two late payments does not usually affect your credit record, but in order to maintain an excellent credit rating, all payments must be made in the amount (or more) and by the date agreed upon.