“To develop a better understanding of the wise use of credit, let’s spend a few minutes with a certain individual we’ll call Mr. Money.” Here’s another short video from Sutherland Educational Films designed to teach young adults about their finances. In this installment, Mr. Money teaches John and Judy about the ins and outs of credit.

To earn credit, first you have to develop your character. You have to be trustworthy. Second, you have to have capacity to pay your bills. And third, you need some capital in the form of savings (and other property). Scoring high on these three Cs is essential to earn a good credit rating.

This film was produced in 1960 with help from the National Consumer Finance Association (which is now American Financial Services Association). Watching “The Wise Use of Credit”, I cannot tell if it’s meant as an educational film, or as propaganda to encourage people to use credit. Maybe it’s both.

Mr. Money: Some people prefer to save to buy the things they want until they’ve saved enough money to pay cash for them. However, there are many people who are able to pay cash who prefer to buy things on credit, so as not to disturb their savings and investments.

Judy: But Mr. Money, doesn’t it cost more to buy things on credit?

Mr. Money: Oh yes, it does, Judy.

My understanding and appreciation of credit has evolved with time. When I came out of college, I used credit for many things, but I did not understand the dangers. The convenience was too much for me, and I charged tens of thousands of dollars.

Eventually, I understood the risks of credit use, but could not see the possible benefits. I was anti-credit. As I began to take control of my finances, I canceled my credit accounts and stopped using it altogether.

Now, however, I’ve reached a point where I both understand and appreciate credit as a tool. I see that with wise use and careful planning, credit can actually provide certain benefits. It’s not for everyone, however. If you struggle with debt, credit is best limited (or avoided altogether) until you’ve obtained the knowledge and self-discipline required to make it work for you.

“The Wise Use of Credit” is a nice introduction to the concepts and considerations involved when borrowing money. It is, however, a product of its era. Beware the blatant sexism when Judy asks, “Gee, Mr. Money. Do girls have to learn all this about credit, too?” Remind yourself that we’ve come a long way in the past fifty years.

This article is about Basics, Credit Cards, Debt, Funny Money  Saturday, 9th February 2008 (by J.D. Roth)