Flickr photo by Andres RuedaWhen it comes to paying for something you don't have the cash to cover, credit cards are America's most popular option.
But how do you know when you should put the card back in your wallet and go straight for the bank for a loan?
We asked finance expert Erica Sandberg, author of Expecting Money: The Essential Financial Plan for New and Growing Families, to help us become better borrowers.
"A credit card is a very useful tool," Sandberg says. "They're easy, they're fast."
But they're also room for trouble.
A few rules of thumb:
1. Credit cards are for short-term borrowing. "Anything you can pay off in three to six months, you're OK using a credit card," Sandberg says. For longer-term payments, hit your bank.
2. Installment loans reduce temptation. "I like installment payments instead of revolving debt because you don't have the option of rolling it over," Sandberg notes. If you think you'll be tempted to procrastinate, choose the loan -- the bank will require a certain amount every month.
3. If you can pay for it in cash, but don't want to, use the credit card. The reward points are worth it -- if you intend to pay it off immediately.
4. Is it something you can save for? "So much depends on your value system," Sandberg says. But if it's something that can be saved up for rather than purchased right away, she suggests putting off the buy will save you money in the long run -- you won't have to pay interest or finance charges.
5. Will borrowing put your family in financial turmoil? "Having a home that's free of financial stress [is not a choice]," Sandberg says. "It's amazing how people will borrow to fulfill an impulse, but [when borrowing] make sure you're at ease with paying your bills." If you're on rocky footing before you borrow, chances are those payments are only going to make things worse.
Do you prefer to borrow from a bank or use a credit card?