Let’s start with the basics so everyone has a strong awareness of one of the most important aspects of finance: credit. What is it and why do we need to pay such careful attention to it? The Merriam Webster definition of credit is that it’s an amount or sum placed at a person’s disposal by a bank. Meaning credit can allow us to buy something today, regardless of whether or not we have the cash on hand, and pay for it later on.
However, despite credit being something many people use on a regular basis, a large majority lack a clear understanding of how it actually works. Most people know that spending money they don’t have can get them in serious financial trouble and some avoid using credit altogether for this reason. Others use it to buy things on a whim without regard to any consequences they may suffer down the road because of it.