Perhaps the greatest disadvantage is the temptation to overspend, and continued overspending leads to serious trouble. Whether or not credit involves putting up collateral, failure to pay a loan may result in the loss of income, valuable property, and your good reputation. It could also result in court action, wage garnishment, and bankruptcy. Misuse of credit can create serious long-term financial problems, damage to family relationships, and a slowing of progress toward goals. Therefore, credit should be approached with caution and must not be used more extensively than your budget permits.
Credit costs money.
It is a service for which you must pay. Paying for your purchases over a period of time is more costly than paying for them in cash. Also, although credit allows more immediate satisfaction of needs and desires, it does not increase total purchasing power. Credit purchases must be paid for out of future income, therefore, credit ties up the use of future income. Furthermore, if your income does not increase to cover rising costs, your ability to repay credit commitments will be diminished.