Question

Which of the following is not a valid reason for using credit?

1) To make a large purchase
2) To build credit history
3) To avoid paying interest
4) To finance education

Answer 1

The invalid reason for using credit is 'To avoid paying interest.' Credit is used for large purchases, to build credit history, and to finance education or vehicles, but it generally involves additional interest if not managed properly.

Step-by-step explanation:

The question asks which of the following is not a valid reason for using credit: 1) To make a large purchase 2) To build credit history 3) To avoid paying interest 4) To finance education. The incorrect option here is 'To avoid paying interest' because using credit inherently involves the potential to accrue interest if the balance is not paid off promptly.

Credit is borrowed money that you agree to pay back within an agreed-upon time, and using it responsibly can help you make large purchases, build a credit score, and finance significant life events like education or buying a vehicle. Moreover, your credit score is a crucial factor in the approval of loans, such as an auto-loan, and affects the terms of repayment. However, credit should not be seen as a means to avoid interest; in fact, credit cards and loans typically come with interest rates that accumulate over time if balances are not cleared.