The improper use of credit among the provided options is buying a short-lived good. While credit is supposed to help cover large or unexpected expenses by spreading payments over time, using it for everyday or low-value items can result in unnecessary debt. So, option 2) Buying a short-lived good is considered an improper use of credit is correct.
Avoid credit for fleeting things (groceries, clothes). Choose it for investments (home, car) or emergencies, planned and used wisely.
- Buying a home (1) and purchasing a big-ticket item (4) are generally responsible uses of credit, as the borrowed amount is invested in durable assets that hold value over time.
- Spreading payments within a budget (3) utilizes credit responsibly, allowing for planned and organized financing without straining immediate finances.
- Meeting a financial emergency (5) can be a justified use of credit, albeit not ideal, if other options are exhausted and the emergency is significant.
In contrast, buying a short-lived good generally means using credit for items that quickly depreciate in value, like groceries, clothing, or entertainment. This can lead to accumulating debt without building any lasting value, potentially trapping you in a cycle of interest payments.
While there are exceptions and personal circumstances to consider, using credit for short-lived goods is generally not recommended for responsible financial management.
Remember, always use credit responsibly and assess the cost of borrowing before making any financial decisions.
Q- Which of the following is an improper use of credit? 1) Buying a home 2) Buying a short-lived good 3) Spreading payments within a budget 4) Purchasing a big-ticket item 5) Meeting a financial emergency