Conversation 1
You really want a new laptop and need it for class (and a game you want to beat), but funds are low. There's one available at a local rent-to-own store. The store would charge you a weekly fee until you pay off the loan. Until it's paid in full, the laptop itself would have to serve as collateral. That means the store would take your laptop back if you failed to keep up payments.
Another option is to use the unsecured credit card your family gave you only for emergencies. This is a revolving line of credit that does not require a deposit or collateral. It can only be used up to a balance limit, though, and it requires a minimum payment if it is not paid off each month.
Of course, you could deal with using the school computers until you've saved enough to buy the laptop outright.
Sandy: Sometimes you have to choose between what you "need to have" and what would be "nice to have." If you can get by with using a school computer, then you shouldn't put yourself in debt. You end up paying more for the item because of interest.
Patrick: Not all interest is equal. There are laws in place protecting users of credit. You have a right to know the interest rate, how it's charged, how long you have to pay, and other terms of any credit agreement. Yes, you pay more with credit, but that doesn't necessarily make using it a bad idea.
Sandy: Right, but what if you can't make the payments? As a student, your income is probably low or nonexistent. If you can't pay it back, you could get in serious trouble.
Patrick: But credit, used wisely, can help you build up a good credit score, making it possible to get your own unsecured credit card, buy a car, or even own a home someday. A smart consumer will compare credit options to determine the best deal.
Question 1
What will you do?
Sign a rent-to-own store contract to purchase the laptop
Use a credit card to purchase the laptop
Be patient and save up for the laptop
