Citizens for Responsible Citizens for Responsible LendingLending

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How Credit Works For

Me

How Credit Works For Me How Credit Works For Me

Think of credit like Warfarin. When

needed, a little thins your blood and

will save your life. But just a little too

much can kill you.

How Credit Works For Me How Credit Works For Me

Credit works for me by increasing my checking

account and savings account balances more than I

would have been able to without using credit and

without reducing my equity

“Equity” is all my assets, the things of economic

value that I own, especially cash and things which

could be converted to cash: automobiles, real estate,

investments and savings.

When can I use credit?When can I use credit?

When my monthly income is high enough that

I pay all my bills, make monthly deposits to

increase checking account and savings

account balances each month, and still have

enough to make the credit payment.

Example 1Example 1

Credit allows me to take advantage of

a temporary low price on something I

would have bought in the future.

Credit allows me to put new tires on my car

a little earlier because of a legitimate low

sale price.

“Buy 3, get the 4th free” is the normal

price . . .

but if free mount, balance and valve stem is

included too it might be worth credit for 4

months.

Credit allows me to replace a failing

appliance, computer or TV a little earlier

because of a legitimate low sale price.

If the same model I would have purchased is on a

temporary sale for 30% off it might be worth 3

months credit.

10% off is the normal price… but a scratch-and-dent

model for 40% off might be worth 6 months credit.

Example 2Example 2

The credit repayments may reduce my

monthly deposits into my savings and

checking accounts…

but after the credit is paid off, my monthly

deposits into my savings and checking

accounts will increase from the savings in

expenses created by the use of credit.

Instead of taking my clothes to the laundromat I will use

credit to install a new washer and dryer in my home.

After I have paid off the credit, I will increase the amount

deposited into checking and savings from money saved

by not using the Laundromat in addition to restoring my

original deposit amount

Instead of repairing my old refrigerator, I use credit to

buy a new larger refrigerator.

I can take advantage of saving on my food budget

◦ food purchased on sale at lower cost

◦ store it for longer periods of time

and use the savings to increase my checking and

savings deposits.

Instead of waiting until a small roof leak has caused

major damage, I will use credit to hire someone to

repair the roof when I first notice the leak.

This saves major expense at a future date, allowing

me to continue regular monthly deposits to increase

my checking and savings account balances.

Example 3

After the last payment is made, I start

putting the original monthly payment

amount plus the savings (on food,

laundry, etc.) into my checking and

savings accounts.

How Credit Works for MeHow Credit Works for MeRecapRecap

Legitimate temporary low price

Savings in expenses

Buy new instead of repairing obsolete appliance

Avoid larger expense later

How Credit Works for MeHow Credit Works for Me

Credit works for me by increasing

my checking account and savings

account balances faster than if I

had not used credit.