The use of credit allows consumers the ability to "buy now" and "pay later." There are often consequences for using that piece of plastic, however, that you may want to think about before you pull that credit card out of your wallet. While the use of credit can cost you big money in the amount of interest you will pay, in some cases it can also reward you with cash and bonuses if you ask yourself the right questions before you make that next big purchase.
Actual Cost
How much am I actually going to pay for this item? If you can pay off the balance by the time the credit card statement processes and arrives in the mail, then the purchase price is actually the only amount you will pay. When you have to stretch the payment out over months or even years, however, the interest on your purchase can make the actual cost double or triple over what you initially paid for it.
Need or Want
Do I really need this or do I just want it? Stores often place items on sale or clearance to entice shoppers to buy them now instead of waiting to purchase them later. Ask yourself whether you actually need the item you desire, or if you want the item because you are afraid the price will be higher next time or the item will no longer be available. Walk away from the item, or wait to purchase it until the next day, to see if you still feel as strongly about owning it as you did when you first saw it.
Paying It Back
Where am I getting the money from to pay for this purchase? Although credit card companies allow consumers to pay for their purchases over time, payments for big-ticket items can still be a $100 or more a month. Unless you have enough money in your budget to comfortably pay this extra amount, you might wish to postpone your purchase until you can save the money to just pay for the item with cash.
Rewards and Benefits
How can I save money on this purchase? If you have decided that you do want to make the purchase, consider which credit card you should use to save you the most money or reward you for making the purchase. Choose credit cards with the lowest interest if the purchase will be paid back over a period of months, or use the card that will earn you rewards or cash back if you plan to pay the full amount when it is due.
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