We know that a credit card sounds like the answer to any prayer, with its ability to still make payments even if you have no money.
While they have many uses, these slivers of plastic can become debt-fuelled nightmares in almost no time at all.
Suddenly, your card is at its limit and in the red.
We know this can be confusing, as often, credit cards are never fully explained or understood and leave you with a misconception of how they can affect your life.
How can you better prepare yourself for this issue? Read on to find out more.
Your credit score is used to determine how reliable you are at paying back loans and what your interest rates should be.
A good score is rewarded with more loan opportunities and a better interest rate, as companies are more confident that they’ll receive the money on time.
Sadly, if you don’t have a credit history, it can be hard to attain a good score. One great way to keep your credit score from dipping is to always pay your balance off in full.
If you’re unable to make a full payment, try to cover the minimum amount required. This way you’ll pay off the amount within the expected time and avoid higher interest fees.
Paying off your card balance is no easy task if you’ve gone into debt. It can be avoided by regularly paying it off each month.
The interest fees you’ll incur will mean the debt takes longer to pay off.
Your single credit card may have variable interest rates, and finding the one that applies is often a complicated task.
If you misunderstand your card’s terms, you’ll suffer the consequences of increased fees and damage to your credit score.
The card is also inconvenient when you attempt to track your monthly spending, primarily if you use more than one card.
Using credit between cash and debit to pay for your expenses can create a confusing bill.
Fortunately, you can avoid these by understanding your card’s terms and reading through the reward details thoroughly.
Expenses can be tracked manually by using a journal, spreadsheet, or personal finance software to record your spending.
A credit card also carries the risk that someone may steal it and put you into the red.
Thankfully, you can avoid this by monitoring your expenses and reporting the fraudulent charges.
Many banks have a 24 hour period to report this from the time the transaction occurs.
While asking people you know for money may temporarily shine a poor light on yourself, we know that in most cases, the people you form close bonds with will be willing to lend a hand.
However, you need to know how to ask them correctly.
There’s more to asking a friend or family member directly than being polite or making promises.
You’ll need to prove that you can pay them back, speak to the right people, and prove your ability to pay them back.
Asking a friend or family member that is close and has faith or trust in you to give you a temporary loan is a fantastic start.
They should also be able to afford it with ease; otherwise, you’ll be affecting their wellbeing.
Never speak about borrowing money if the person is insecure about their finances, as they are unlikely to help you.
Before you start a long-winded speech about why you need the money, take a step back and organize your finances.
You’re more likely to get a friend’s help if you can show them that your finances are in order, that you know your monthly expenses, and that you’ll be able to pay them back.
The benefit of organizing your monthly expenses is that you can identify any areas to cut back temporarily.
Whether it’s your frequent takeaway dinners or an excess of sweets and snacks on your receipts, decreasing these expenses will leave more room for repaying borrowed money and convince family and friends that you’re genuinely making an effort. Calculate the exact amount of money you need to borrow.
If necessary, ask for a bit more than you need but never less. If you don’t ask for a sufficient amount and ask your friend or family again creates the impression that you are irresponsible.
If you have no other choice, ask for part of the amount, just to get you started. After this, you can prepare a detailed explanation to explain why you need the money.
During this, admit any mistakes you make and speak of how you’ll be correcting those.
If you’re changing for the better, you’re more likely to get help than if you were to repeat the same errors over and over again.
While explaining your dire situation, try to avoid making yourself come off as too emotional.
While pity and a sob story can help you out, if someone begins thinking that you’re overselling the act, they’ll likely discourage anyone from helping you.
To finish off your cry for help, clearly explain if you’re willing to pay interest or anything you’ll do in exchange for their support.
With this, you should also explain your payment plan and how long it would take to repay the money.
If you’re going to take out a loan, don’t jump at the first offer even if you’ve had a couple of rejections before this one.
Getting all your options on the table can save you money, with lower interest rates and an ideal repayment time.
Remember, you should look at both the payback time and the interest rate before accepting a loan.
Use the calculator on your phone to work out, which will cost more in the end, and also how much you can pay back at a time.
Some loans will require a lump sum repayment that you may be unable to afford.
If you can’t find anyone to supply you with a loan, you may be tempted to use a loan shark.
However, there are several unseen dangers when you get involved with one. We highly recommend that you avoid turning to a shark for help.
Loan sharks are illegal borrowers, often operating with shady methods that put you at harm either physically and financially.
They often recoup the losses of a missed payment by taking your belongings such as jewelry and electronics or utilize violence to pressure you into paying them as soon as possible.
Why would anyone consider a loan shark with all the risk? A shark has far more relaxed criteria for borrowing money than any online or physical company.
This factor is what will let you identify a loan shark before it’s too late.
Check the license and previous history of a company, and browse through online reviews to see the opinion of others.
While not always classified as a loan, pawning some of your belongings is often a much safer route.
Doing this can help you pay off your credit card debt, increase the money from a loan that wasn’t substantial enough, and get you through till your next paycheck.
At most pawnshops, the interest rate is lower than at a bank or other credited borrower. In most cases, you won’t hear the mention of a credit score, as it often isn’t required.
This is all due to how pawning an item works. To pawn an item such as your jewelry, you take it into the shop and have it evaluated. They’ll set a maximum price that they’re willing to loan to you.
If, after the agreed-upon period, you don’t repay the money, your item can then be sold in their stores.
This time frame usually lasts for three months. The store needs to profit if the item goes on sale, you will never receive the full value.
If you know you’ll be unable to repay the amount on time; you should consider selling instead. You may gain a bit more money by doing this.
If you apply these tips and consider your options carefully, there’s only one thing left.
Spend your money wisely and watch your finances with a close eye to avoid having debt or an over-spent credit card.
