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Although many payment choices come down to personal preference for certain types of purchases, it’s better to make a conscious choice. Ask yourself a few questions about the payment and funding method:
Cash is real and immediate. The term “cash” includes checks and debit cards. When you use cash for purchases, there are no approvals required or interest charged. But when it comes to paying for big-ticket items like cars, houses, computers, and college tuition, few people have enough funds on hand to pay in cash.
Using a credit card can give you extra time before you have to pay for what you purchase, though this is not true for all cards as some charge interest immediately. The risk in using credit is that it can be easy to purchase more than you can pay off each month. If you run up a high credit card balances, the interest can start adding up and your debt start increasing.
Loans and lines of credit can be useful when you have an opportunity to purchase a big-ticket item that will benefit you for years to come. Here are some situations to consider using credit:
Knowing what type of funding to use for each situation can help you stay on the road to financial success.
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