As much as we do our best to keep our spending to a minimum with great tricks sometimes even those who are the most sensible with their money can find themselves in unexpected financial hardship. At times like these you may need an extra helping hand in the form of a loan or credit card from a company like GoBear but these solutions have a bad reputation. Many people with credit cards can find themselves spiralling into uncontrollable debt due to their considerable interest rates however, they can also be a great way to improve your credit score. Here, I explain how to handle having a credit card and manage the potentially destructive impact of them on your financial security.
Short Term Solution
The first thing to know is that credit cards are not a long-term solution to financial difficulty; if you try to use them in this way, they are more likely to contribute towards your difficulties. They are best to use when you have an unexpected expense which you cannot afford to pay immediately but you know you can pay off in smaller instalments over a longer period of time. Constantly relying on a credit card to help you make ends meet on a monthly basis will stop you creating a more sustainable, sensible budget for yourself that takes into account all realistic expenses.
Stick to The Terms
One of the most important things to do when considering whether or not to get a credit card is to do your research. Take a thorough look at all the deals out there, have a realistic idea of how much you’ll be able to pay off, and how regularly you’ll be able to make payments. Seek advice from professionals if you’re unsure and be aware that credit card providers may try to sell you deals which may not be beneficial to you. Unfortunately, credit card companies make a lot of money from the debt that some people manage to get themselves into.
Once you have decided on a company and a deal, make sure you clarify all the details in writing so that you are fully aware of all the terms. This is where you can be caught short by loopholes and small print so be extra careful. Set a sensible credit limit that you can afford to pay back and make sure you’re not tempted to borrow a little more to spend on things you don’t really need. It is much safer to save for these things yourself rather than relying on a loan.
Crucially, you must stick to the agreed payment schedule as this is where you can begin to build up interest on top of your agreed payments. This is the main way in which people manage to spiral into uncontrollable debt. Interest rates on credit cards are notoriously significant so be strict with your budgeting to make sure your loan repayment dates are met.
Keep Track of Your Spending
It can be easy to lose sight of your spending when you’re using a credit card, as they are such a convenient and quick form of payment. Keep track of how much you have spent so that you don’t go over your limit and so that you make sure you are only spending it on exactly what it was supposed to be spent on. One easy way to keep track of spending is by saving receipts and calculating the total amount spent each day so you know how much you have left. Alternatively, you could set a daily budget for yourself or read my top tips for what to do when you’re feeling spendy.
If you use your credit card in a sensible way, by meeting your payment schedule dates and amounts and not going over your limit, it can really contribute positively to your credit score. Other lenders will be able to tell from this record that you are sensible with money; making you a more credible customer for future loans such as a mortgage. However, if not handled responsibly you can find yourself in debt that is impossible to pay off. By following the steps above you can make sure that you avoid this pitfall and make the most of what can be great opportunity for a little bit of help.