The use of credit has often been exploited and abused not by the lender but by the borrower. If she fills up her gas tank she uses the credit card. If she shops around for small things and eats a burger, the credit card is used again. If she buys a small affordable appliance, she is more than willing to have it charged to her credit card. Sometimes when she buys just a box of bath soap, she still avails of her credit line.
We have to remember that anything acquired on credit has an interest. The term interest in this case may not necessarily mean a certain percentage added on to the amount of value of the goods purchased or money that is borrowed. It may also mean the personal interest of the lender as to why they are in business with you. Their interest with you is that they will arrange for your credit, so that you will have to pay them registration fees and annual dues. That is one of their principal interests, and such is the case of credit card companies.
Credit should be wisely used and not subjected to abuse. If one is able to control using credit in a number of transactions, she is able to save on financial charges and interests. Personal expenses and overhead face to face with the income earned should be well planned. It is similar to running a business or a corporate entity. Corporations do not abuse credit. They do not just borrow and borrow money from banks just because they have available credit. They make use of any available funds they have before deciding to get a loan. Most big companies have sections or departments which handle financial planning and control.
This process should also be applied in running a personal business or even in one’s personal budgets and expenses. On the average, the financial costs incurred by an individual to include interests, service fees, and other charges related to using credit as a personal facility, would reach perhaps more than 5% of monthly income. So if one is earning $3000 monthly and if we assume that 2% of the credit is unwisely used, he loses $60 a month or $720 in one year.
Such amount could have been one’s savings instead, if only there were some prudent and careful checking of the use of credit.
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Posted by Michael 
February 2008