You are 22 years old, unmarried, have no children, and a take-home pay of $2,500 per month. You depended on your parents while attending college. You are engaged to be married in 18 months. You have a very little credit history, but want to establish a good credit rating so that you may be able to rent/buy a home and qualify for low-cost loans when you buy a new car or appliance. You also want to be able to qualify for credit cards with good reward programs and low fees and interest rates.
Read each statement below and indicate whether it is a good or bad reason for using debt.
1. Debt provides protection against rip-offs and fraud.
2. Debt provides financial flexibility and convenience when making payments.
3. You have unused credit available on your credit card.
4. The habit of buying on credit can lead to overspending and overindebtedness.
5. Debt provides the means to purchase big ticket products sooner rather than later.