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Good vs. Bad Credit

ScalesUsing credit is not a bad thing — it’s how you use credit that can be good or bad. Some benefits of using credit include:

  • It’s convenient and safer than carrying cash.
  • You can spread out payments. 
  • It’s helpful for emergency situations.
  • Using credit can help build a strong credit history.

Credit also can have its drawbacks if you don’t understand when and why to use it. Using credit to “buy now” without thinking about “paying later” can cause you to pay more than you intended through interest and fees. This can happen when:

  • You use credit to buy things you can’t afford and don’t really need.
  • You take advantage of special offers such as “no interest for 12 months” without planning to pay the debt before the special offer expires.
  • You don’t understand the terms of the lending agreement.
SAM tips

Use caution with two costly types of borrowing: payday loans and cash advances. Payday Loans are used to bridge a short-term gap between your current needs and your next paycheck. Cash Advances allow you to borrow cash on your credit card, up to a certain limit. Read about the pros and cons of payday loans and cash advances below.


  • Pros:
    • Application for the loan is easier.
    • Usually doesn’t involve a credit check.
    • Can provide immediate cash, if used wisely.
  • Cons:
    • Works like a cash advance against your next paycheck. The cycle usually ends up repeating itself.
    • High interest rates (often up to 300 percent).
    • This is a legally binding loan agreement, and lenders will aggressively pursue borrowers for repayment.
  • Do This Instead:
    • Put off purchases, if possible.
    • Ask friends or family for short-term help.
    • Consider a credit card cash advance.
  • Pros:
    • Money can be withdrawn at an ATM if using a credit card.
    • Pre-authorized checks can be deposited or cashed at your bank.
    • Offers quick cash, up to a certain limit.
  • Cons:
    • High interest rates apply, and lenders are not required to apply minimum payments (if combined with a credit card) to the cash advance portion.
    • Flat fees for the advance amount and ATM charges may apply.
    • Borrowing through cash advances can create a cycle of bad borrowing habits.
  • Do This Instead:
    • Put yourself on a spending plan and look for money through cutbacks in your expenditures.
    • Use your credit card for purchases instead.
    • Ask family and friends for short-term help.
    • Shred all pre-authorized checks to avoid temptation.
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