Hayden needs some equipment for the apartment he is renting while attending college. He finds some things on sale at a reasonable value, and he opens a charge account with the retailer.
I don’t understand this one, since the items are on sale, couldn’t Hayden just use his money..???
What money?
He could -- and it may be the wiser decision.
Still -- many retailers offer a discount the first time you use a new credit card.
I got a $20 item for nothing when I opened an account at Sears. I think the clerk made a mistake and I should have paid $10. I also never activated the card. <g>
His cash that he probably has with himself somewhere...
How do you know he has cash?
Most college students, especially those renting apartments near campus, have almost no cash lying around.
Also, the situation didn't indicate he has cash lying around!
Woah, that must have been a really bad situation Ms. Sue, that's a rip-off. So it would "be" the wiser decision to use the credit card?
In this case, yes. But remember, she doesn't have to validate the card or continue using it.
Writeacher has the right idea. The student may not have the money now, but will be able to pay off the debt for these necessary items within a couple of months.
It's a valid question, but let's consider a few factors that might explain Hayden's decision to open a charge account instead of using his money.
1. Budget Management: Hayden might have a limited amount of money available at the moment, and opening a charge account allows him to spread out the payments over time. This way, he can afford to buy the equipment without having to make a large upfront payment.
2. Cash Flow: Even if Hayden has enough money to make the purchase upfront, he might prefer to utilize a charge account to preserve his cash flow. By using a charge account, he can keep his money for other expenses or emergency situations that might arise during college.
3. Deferred Payments: Depending on the terms of the charge account, Hayden may have the option to make payments in installments with little to no interest. This allows him to make smaller, more manageable payments over a period of time rather than paying for everything upfront.
4. Building Credit: Opening a charge account and responsibly managing it can help Hayden build a positive credit history. This can be beneficial in the long run as it may facilitate future opportunities to borrow money (e.g., for a car or home purchase) at better interest rates.
By opening a charge account for the on-sale items, Hayden is essentially financing the purchase over time while taking advantage of the convenient payment options and potential benefits mentioned above.