Use of Credit in the U.S.

There are both pros and cons to spending with credit. A consumer must be responsible for their spending and plan ahead for the future. Many people are quickly swept with debt a short period after receiving a credit card. Other consumers are wise enough to control their spending and limit their purchases.

For major purchases credit may be useful because it provides an immediate source of funds where as you might be saving for years to afford a house. Or maybe credit may supply the capitol for a small business start up. The problem many people have at this point is that they now owe the money lent to them and do not realize the amount of debt they are in. You are required to make a monthly payment and to pay interest on the amount loaned. The amount of interest you pay is also determined by the amount of your loan, your credit history and the economy. The interest in most cases can range anywhere between four and ten percent. Theses purchases may also require collateral for an approval. Collateral is something provided to the bank as insurance that they will be paid. Physical property such as a house that has been paid for or a vehicle that has been paid off may be common to use as collateral. This property will be claimed by the bank if you fault in your payments.

Smaller purchases for durable goods such as a television or repairs on an automobile can be included in your budget even though you may not have the cash to afford these things. This is especially useful for emergencies such as car repairs, medical emergencies, or financial situations. However this quick funding may quickly be overused by many consumers. A consumer may decide on a whim to take a gamble and purchase a four thousand dollar surround sound system only to find out that he cannot cover his bill at the end of the month. This type of spending creates debt and has a bad effect on your credit report. Consumers must learn to control this type of spending and manage their debt properly in order to keep a good credit report and stay ahead of their payments.

Another example of a purchase that credit may be used for is non-durable. These types of purchases include food and services. Many college students use credit on this "pizza and beer" type spending. It's a much more convenient way to pay for such purchases with the slide card method. Overspending is a real danger in this area. Many consumers will quickly over extend