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4 November, 10:44

1. What are the advantages and disadvantages of credit?

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  1. 4 November, 13:38
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    Advantages:

    - Ability to make a purchase on installment.

    Credit card payment often provide a monthly payment for a certain period of time. Nowadays, you can find a lot of credit cards who provide this with little to no interest.

    - It provide a way to purchase materials during emergencies.

    Often time, companies have a guaranteed sales but doesn't have enough capital to fulfill it. Credit allows companies to fulfill these sales so they do not lose out on the opportunities to make profit

    - Building Credit history

    Every time you pay your credit accordingly, the positive record will shows in your credit history. This often used by banks in case you need to ask for larger loans in the future.

    Disadvantages:

    - Larger amount of payment.

    Most credit require interests. Which means that the amount you need to spend to purchase through credit tend to be higher compared with purchasing with cash.

    - Annual fees

    On top of interest rates, credit cards often require you to pay an annual payment as a form of 'membership' fees

    - Promote over consumption

    When handled properly, credit can be useful. But there are some people who use credit to purchase luxury items rather than necessities. If they can't pay it back, the debt will kept accumulating and might force them to declare bankruptcy.
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