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Credit Facts: Understanding the Advantages and Disadvantages of Credit Usage

Learn about the concept of credit, who uses it, and the pros and cons of utilizing credit for purchases. Understand the benefits of instant enjoyment, convenience, emergencies, savings, credit rating, and purchase record, as well as the pitfalls seen in credit costs, impulse buying, overbuying, and financial difficulties.

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Credit Facts: Understanding the Advantages and Disadvantages of Credit Usage

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  1. WHAT IS CREDIT? Credit is the privilege to us someone else’s money for a period of time. A creditor is the person who loans the money and a debtor is the person who takes the loan.

  2. WHO USES CREDIT? Credit is used by almost everyone. Businesses and consumers are amongst the people who usually use credit. They use credit to buy long term and short term purchases.

  3. ADVANTAGES OF CREDIT • Instant enjoyment- you can spend your money right away and not have to worry about having enough • Convenience- credit replaces cash and you can use it at anytime • Emergencies- credit is ready at anytime for spending, especially incase of emergencies • Savings- can take advantage of savings by getting an opportunity to buy goods for higher quality • Credit rating- helps to indicate whether you are a high risk for credit • Purchase record- gives you a monthly statement

  4. DISADVANTAGES OF CREDIT • Credit costs- there may be high interest rates • Impulse buying- you may buy whatever you see without giving a second thought to it • Over buying- there is a possibility that you may buy things that you cannot afford • Financial difficulties- you can lose track of your monthly spending

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