Credit cards have improved our lives tenfold. That little piece of plastic you hold in your hand has the power to make anything you need yours with just a simple swipe. However, it does have its limits.
Other than the credit limit set by your bank, you have to use your card according to your current financial status. That way, you can fit it into your budget and make the payments as necessary.
So, before you even think about making that large purchase, take a step back and ask yourself these questions before swiping your credit card:
Do I need this?
Before anything else, consider if the purchase that you want to make it a necessity or a want. If it’s a household item like a washer that needs to be replaced, then it is a need. However, if it is something like the new model phone that was just released, and your current mobile is working properly, then it might be best to put your plans on hold.
Being able to determine if something is a need or a want is the difference between going broke, and having enough in your bank account to live a comfortable life.
Can I afford it?
Next thing to ask yourself is if you can afford the item you are looking to buy. Remember that a credit card is similar to a loan, the company will pay for the purchase now, but you will be expected to pay them back as soon as possible.
With more significant purchases, there is usually a payment plan available. It’s best to check if you can pay for it in instalments before anything else, that way you can plot out how you will pay for the item over a set period.
If paying in instalments isn’t available, it might be wise to put the purchase on hold or find a place where your preferred payment option is available.
Is Using the Credit Card the Only Way?
Remember that although credit cards are useful, you can also check to see if there are other ways to pay for the item.
This is where having an emergency fund might come in handy. You can use cash payments to purchase to avoid interest rates and monthly instalments. Another option is to save up for it.
If you can find any way to avoid paying hefty fees is always better than a credit card payment.
What else is the item going to cost?
Large purchases typically have interest rates attached to them. That means that just because you’ve paid for the item’s sticker price, doesn’t mean you’re done paying for it.
Do your research and ensure that you can pay for any additional costs like maintenance and other accessories.
Can I borrow this item from someone else?
If the item you are looking to purchase is something you will only use temporarily like an electric drill, ask around if you can borrow a friend’s who is not using it.
This way, you can avoid making the purchase and save a few hundred dollars in the process while still able to use the item for its intended purpose.
When it comes to large purchases, it is essential to think about it and make sure that you are not digging yourself into a hole that you cannot get out of. The same can be said when you take out loans or approach services like Alpha Car Finance for your vehicle.
You need to ensure that you choose the best plan and payment method so that you can make the payments on time, every time.