Interesting piece I found on Investopedia this morning: 9 Reasons to Say “No” to Credit.
Their nine reasons:
1. Financing your purchases doesn’t teach self control.
2. Financing your purchases means you aren’t sticking to your budget.
3. Credit card interest rates are expensive.
4. Credit card interest rates increase when you can’t pay off your balance in full.
5. A poor credit score can affect your insurance rates, being accepted for a job or the ability to finance meaningful purchases like a home.
6. Poor financial habits can jeopardize your relationships.
7. Financing purchases can lead to higher spending.
8. In a worst-case scenario, the habit of financing your purchases can lead to bankruptcy.
9. Avoiding financing can bring peace of mind.
I agree with all of the above. BUT…
A smart person can use credit to their advantage. If you have the option to pay cash or get 0% financing, check to see if you can get a discount for paying cash. If not, take the 0% offer. Then, put the cash in an interest-bearing account and set up automatic payments to pay off the purchase within the interest-free period. Sure, interest rates aren’t good right now but you will earn a little something.
Although mismanaging credit can hurt your credit score, managing credit properly (rather than not using it at all) can help it.