Building credit doesn’t have to cost you money. In fact you can save money in the process.
There are two kinds of goods that we buy: consumer goods and durable goods. Consumer goods are used up shortly after purchase. Durable goods are used over a matter of years. In the vast majority of cases durable goods are more expensive, and you need to borrow to get them.
Some goods are nearly always bought with credit. Real estate is the perfect example. When was the last time that you heard of someone buying a house with cash? It’s so rare that too much equity in a first home purchase is flag for the bank to check for money laundering. New cars and business start-up expenses are usually financed, too.
Consumer goods, however, can be bought with cash or credit. If you’re thrifty, you’ll save up the money for a purchase rather than racking up a balance on your credit cards. Paying with cash keeps you on budget, saving on interest charges and reducing your stress. (more…)