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The Wise Investor

wishing to dilute his earlier points, "but they are convenient. I
suggest you keep a single credit card, with a low credit limit.
Every time you receive a statement, pay the whole amount
This way, you can have the convenience of a card
without using it as a form of expensive, long-term borrowing.
You might also consider having one other card, with a large
credit limit, locked away in a cupboard for dire emergencies
like medical operations. However, my dear, it requires
discipline not to use it, and you are the only one who can
know whether this will work for you or not.
If in doubt, don't have it. Overdrafts are of questionable
use. If your account rarely goes negative, then they can be
useful to stop the occasional cheque from bouncing.
However, if you are one of the people who runs their
account close to the overdraft limit, then they are a complete
waste of time.
You do not have the protection factor, as cheques will
bounce anyway because you are close to your limit. All you
have is an expensive long-term loan that has not even bought
you a specific item.
Overall, I suggest that you cancel your personal
overdrafts. Incidentally, overdrafts are quite useful in
business, but that is another story."
John paused and rested. The discussion on personal debt
had gone longer than he had expected, and yet it was a
critical issue for Kate to understand. Soon, he hoped, Kate
would understand how to borrow for investment, how to
borrow for items that increased in value, not items that
declined in value. She would, he hoped, eliminate borrowing
for purchases and consuming, and use loans as part of her
investment portfolio. Still, he had a long way to go before
Kate was ready for this.
"Finally, Kate," John said, "there are times when we all
need to borrow. Some items, such as a house, are so large
that it is rarely practical to save up and purchase them in
cash. One day, you will have enough money to buy