Line Of Credit: Not a Second Income
Yes, sometimes a line of credit is useful if you need money immediately and realize that using your credit card is not the best financial decision. Most often, it is never the best decision to use your credit card for big purchases unless you actually have the money in the bank and you are going to pay it off immediately. There are situations when people want to earn points or miles on their credit card and make this decision. However, most other times it is not in anyone’s best interest to carry a balance on a credit card.
First, if you decide to research line of credit options, which you should always do, make sure you shop around to get informed and compare interest rates. Secondly, you will notice that many financial advisors will advise you to cap your line of credit and then make sure you pay off that line of credit before you get a new line of credit. For example, if you need $5,000, do not take the $20,000 the bank may offer you. First of all this is not a bonus for you and it becomes more and more difficult to pay back the line of credit when you start thinking that it would be so great to not only get a new bedroom set for the kids but also a new washer and dryer.
In short, do not take more of a line of credit than you need and make certain you pay back everything before you spend again. This will also help you build financial confidence because you will be paying off your goal quickly.
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