Which of the following is an advantage of using credit?

• A. It eliminates the need to pay interest on borrowed funds.
• B. It always results in lower overall spending.
• C. It allows you to make purchases even if you do not have enough cash on hand.
• D. It guarantees approval for all future loans.

Answer: (C)

Verified step by step guidance

1. Understand the concept of credit: Credit is a financial tool that allows individuals or businesses to borrow money or access goods and services with the promise to repay later, often with interest.
2. Analyze the options provided in the question: Evaluate each statement to determine its accuracy and relevance to the advantages of using credit.
3. Option 1: 'It eliminates the need to pay interest on borrowed funds.' This is incorrect because credit typically involves paying interest on borrowed amounts unless it is an interest-free loan or promotional offer.
4. Option 2: 'It always results in lower overall spending.' This is incorrect because using credit can lead to higher spending due to interest charges and potential overspending.
5. Option 3: 'It allows you to make purchases even if you do not have enough cash on hand.' This is correct because credit provides the ability to make purchases or cover expenses when cash is unavailable, which is a key advantage of using credit.