Should We Use Credit?

Is credit a good or bad thing? A good understanding of what exactly is meant by credit will help avoid it becoming a problem.

What is the difference between credit and debt?

Six months FREE credit. Credit available. All items can be purchased on Credit.

These are the type of slogans which are used to tempt people and convince them to purchase now.

Perfectly acceptable commercial practices, but it is very important that we understand what it really means. For example, do you think as many people would be attracted by a headline which invited you to go into DEBT for three years? It might make you think a little differently about just how important this particular purchase is to you and is it really vital to act right now?

While the purchase represents a credit to the merchant, as far as the customer is concerned it is nothing more or less than a debt. Of course, the concept of debt is not totally negative and much of the world’s current prosperity relies on the idea that some current consumption must be paid for out of future income.

This is true of individuals, corporations and even countries. You might wonder if any amount of debt is acceptable. The answer, say most economists is a resounding yes, of course it is! Not all debt is bad or even unavoidable. The vast majority of us these days must take out loans; e.g. to buy a house, get a secondary degree or buy a new car. Problems arise, however, when consumers overspend with little regard to their ability to repay those loans.

Just how much should be borrowed and how and when to pay it back is beyond the scope of this short article, but details can be found in others by the same author.

There is no doubt that when it is used correctly, credit can be a positive force.

It is essential to have the right knowledge, so if necessary, do your research or consult an expert.

The Difference Between Debit Cards And Credit Cards

The plastic cards in your wallet all look very similar. It is important to know exactly how the different types of cards work, along with their advantages and disadvantages.

Also known as bank cards, debit cards are ‘plastic’. They are the same size as many of the other cards in your wallet or purse and let you spend money without the need to carry cash. Similar to writing a cheque, though, the funds are withdrawn instantly from either your savings or checking account. There are even accounts designed exclusively for shopping online, so in this case there is no physical card involved.

Debit card use has spread like wildfire in many countries around the world and has overtaken the cheque, and in some cases, cash transactions as well. Just like credit cards, debit cards are used to make purchases over the telephone and over the internet, making it easier than ever to spend money that you have, and to also spend money that you do not. If you wish to ‘over draw’ your account, (spend money which is not in the account), then make sure you have your bank’s agreement to do so.

Acting as ATM cards, debit cards can be used to withdraw cash instantly from almost any cash machine. Some business merchants also allow for cash back where you can withdraw money from your account when paying for goods and/or services at their retail outlet.

Debit cards differ from credit cards in that debit cards immediately deduct an amount of money, from your checking account, for example.

A credit card allows you to spend money on credit from the bank where you got the card. Basically, a debit card spends money you have and a credit card spends money you do not have.

Systems accepting debit cards have become popular in video arcades, movie theatres and theme parks. Many people really can manage their financial life without carrying any cash whatever.

Plastic cards can be very easy and convenient to use, but it is important to know exactly which type you are using to keep your accounts in order.

How Overdrafts Should Be Used

One of the first chances you get to borrow money from your bank might be in the form of an overdraft facility. This can be a very useful method to see you through a short term need for immediate cash.

When your credit score is acceptable, your bank may well grant an ‘automatic overdraft facility,’ to use with with your current or checking account. This allows you to borrow up to the ‘overdraft limit’ without needing to apply to the bank for permission. You will, of course, pay interest on any amounts borrowed, but this can be a very convenient method of taking care of unexpected bills or expenses. The real value of this facility can be lost, if it is regularly used every month and simply becomes part of the budget. This can then lead to real problems when the unexpected happens and there is no cash available. Many a family has been driven to seek expensive credit, by simply allowing their spending to run beyond what they can really afford.

If you do not have this ‘automatic’ facility offered, then it could be a good idea to request that you be allowed to overdraw up to an agreed limit and only use it when absolutely necessary.

Do not use the facility and then ask permission later, it could prove a very expensive mistake. Many banks will charge what some people consider to be an extortionate amount, just to write to you and tell you that you have misused your account. For those on low incomes, the amounts charged can cause severe difficulties and ensure that, what many consider a simple mistake, can cost a great deal of money and inconvenience.

Used correctly, the overdraft can be an extremely useful part of your financial planning.

Once again, being aware of the rules and making sure not to make mistakes out of ignorance can keep your accounts in order.

Understanding personal loans

When a more formal credit arrangement is necessary for a larger purchase, then your bank should be the first place to go to ask for a personal loan. Just remember, borrowing money always comes at a price. The more money you borrow, the longer it will take to pay it all back and the more interest you will pay, making your purchase more and more expensive each month. That is why it is so important to understand how interest works, before we begin talking about the different types of loans available  today.


There are two basic types of loan interest: fixed rate and variable rate. Both offer their own pros and cons and should be considered carefully before any type of loan is considered.

Fixed Rate Interest is a set interest rate that does not increase during the life of the loan no matter what! However, should interest rates suddenly nose dive you will be stuck paying the higher rate for the life of the loan.

Variable Rate Interest, on the other hand can fluctuate depending on the terms of your loan. In most cases, the interest (and your monthly payments) increase to match the current rate. But, in a downturn, they may decrease. This type of loan can see a change in interest rate monthly, quarterly or annually depending on the terms of your loan, which can make it difficult to budget your incoming monies.

Why is it so important to understand the difference between a fixed and adjustable rate loan? Because it can have a dramatic effect your monthly payment now and for the years to come.

Certainly, variable rates can be much lower, but they come with a big risk. If you are using that low starter variable rate to either qualify for loan at all, or to simply buy bigger, you may want to reconsider. After all, the odds are those payments will increase over time not decrease, and those increases can add up to hundreds of dollars per month.

But, before you decide for or against either type of loan,  look at their good and not so good points.

How to begin to deal with your debts

Well done reader.You have made an excellent start you have decided to look for ways to help yourself out of this situation. Facing the fact that you have a debt problem is one of the most difficult things some people ever have to face. So well done! Now let’s start dealing with the debt.



The very first thing you need to do is work out exactly how BIG the problem is. I am sure you know roughly you owe $..., or £. But that is not good enough, for your dealing with debt to succeed you need to know exactly where you stand with all the people you owe money too. So here is my first set of tips-

1.Collect all your paperwork together, look in the back of the drawers in the kitchen, in the glove compartment in the car in you wallet or purse, hand bag or briefcase we need to know it all before we can start to work on clearing it. OK got it all right now for the next step.

2.Sort it out, by this I mean separate the letters and bills and reminders and demands into piles which relate to the company or debt they refer to. So the mortgage or rent demands, the electricity the gas, the water, credit cards, a pile for each card, bills that relate to the payment of tax etc. Then take each pile and put the letters and demands into date order. Yes it’s a slog but when you have finished you will know exactly who is intending to take you to court and who is asking you to pay by the end of the month. Right now you have to make a list, this should give you the total that you need to pay as well as the amount you need to pay each month. is very important when it comes to working out the priority of the debts.

3.Ok now you know how much you owe, let’s take a look at the other side of your finances. How much money comes in every month for wages or salary, social security etc. Make a budget which includes paying the highest priority debts and being able to feed the family. Now I can see the problem, there is not enough monet to pay the instalements on the debts and the bills- right on we go.

4.Do you owe money to anyone who could send you to prison? Check this first - for example the tax authorities. You must negotiate payment of this type of debt first as it is hard to earn money in prison and then what will your family do?



For further steps to take look out for our next instalment. Don't despair you are really on the right track now. And we are with you.

What is catalogue shopping? Why shop this way?

Shopping for goods and/or services by catalogue can be the most convenient method for low value home purchases. You place an order for a specific product using the telephone or email, and then the product arrives directly to your home, or to a nearby business retail outlet, where you go and pick it up. In some cases, some merchants allow goods to be shipped to a third party, in the case of sending a gift to someone living somewhere else. A mail-order catalogue, for instance, contains a selection of merchandise offered by a specific company. The companies who publish and operate mail-order catalogues are referred to as cataloguers. They buy or manufacture goods, then market these goods to their prospective customers. Many of these cataloguers are increasingly sourcing their wares from China, where it has become cheaper to manufacture goods and even ship them half way across the world to your door step, than to make them down in your city or town and drive them to your door.


These catalogues are published in the same way as any magazine and distributed usually through the mail and on the internet, which is now the most widely accepted way to order the things you want. It is also referred to as e-commerce or online shopping. Merchants will usually extend a reasonable amount of credit to online or catalogue shoppers because of their low overhead and low cost of their goods reduces their risk and makes it easier for you to buy from them.