establish credit by repaying a loan from a bank or a
credit union according to the loan agreement. Making
these payments according to their agreements means
that you pay the amount agreed upon by a certain date.
You can then use these companies, banks, or credit
unions as credit references if you apply for credit at any
Use of Credit by Navy Personnel
The Navy expects all its members to discharge their
financial responsibilities in a timely manner. The Navy
expects its members to be a credit to themselves and the
naval service. Knowing about credit lets you handle
your financial affairs better and often saves you money.
If Navy personnel are to use credit wisely, they
need to know the cost of credit. They especially need to
know how to avoid some of the problems young Navy
men and women often have.
Credit plays an important part in the financial
world. Use it wisely and carefully, and pay attention to
the following principles:
Use credit for those necessary goods that you
cant afford with one or two paychecks.
Use credit mainly for goods that have a useful
life longer than the time needed to pay for them.
Make as large a down payment as possible. This
reduces the total amount spent because of
Know what your income will be. Set a spending
limit equal to the smallest paycheck received to
be sure of having enough money to meet the
payment when due.
Dont buy another item on credit just because
you have finished paying for one.
Avoid the temptation to use credit for splurging.
For example, buying too much on credit at
Christmas becomes a shock in January when you
receive the bills.
Check with consumer affairs offices about local
credit regulations. For example, some states
allow up to 3 days to change your mind on a
credit purchase or a loan received.
When using credit, remember the following facts
Credit costs money, but many credit plans exist.
Some plans are much less expensive than others.
When you buy a car or furniture, you shop for the
best bargain. Do the same when you shop for the
best bargain in credit.
Consider carefully before borrowing from
finance companies. These companies often
charge high interest rates on loans.
The faster you pay off a debt, the less interest
charges youll pay.
Use credit only for unforeseen emergencies and
for higher-cost purchases, such as furniture, cars,
While buying on credit has advantages, you also
need to recognize some of the disadvantages of using
credit. The following are some of the problems you may
Credit customers may overbuy.
Credit customers may buy at the wrong time or
Credit prices may be higher than cash prices.
Credit ties up future income.
Payments must be made on time.
Because of the addition of interest charges to the
price, the purchase costs more.
REVIEW 2 QUESTIONS
Q1. What is the safest and most convenient way to
keep track of the money you spend?