In an ideal world, you’re able to put spend on your credit card and pay off your entire bill in full, by the time your next due date rolls around.
But sometimes when finances are tight, you can (and should) still use your credit card to serve a purpose.
By prioritizing a low-interest credit card and asking for help when needed, you can keep the amount of debt you take on during a rough time to a minimum.
Use your credit card with the lowest interest rate first
It’s not easy to find a credit card that has a true low-interest rate. Many credit cards offer an introductory 0% APR promotion, but once that’s over, the rate jumps, often to an eye-popping level.
Even if you find this unicorn of an offer, it can take weeks to receive a credit card in the mail. So, this strategy will likely only work for those with a low-interest credit card in hand (or one that still has a 0% intro offer that hasn’t expired).
However, it may still be worth applying for a low-interest credit card if you anticipate that your cash crunch will last more than a week or two.
Just make sure you can take a hit on your credit score temporarily. No need to get yourself into worse financial trouble if your score can’t take it.
Ask your credit card company for a lower interest rate
As surprising as that may sound, it is possible to ask your credit card company for a helping hand.
Credit card companies are known to offer lower interest rates and waive fees when their cardholders are in financial distress. Of course, there’s no guarantee that your credit card company will grant your request for help. But it is definitely worth a shot.
Simply call the customer service line of your credit card company. Start the conversation by providing information about how long you’ve been a customer of the company. Then ask for assistance. In some cases, it might be that easy. But more likely, you’ll have to take your request up the chain of supervisors.
Be flexible with your ask for either a lower interest rate or waived fees. You might be surprised by what the credit card company is willing to offer you. This is especially true if you are a long-term customer with a track record of making on-time payments.
If possible, continue making on-time payments
You might not be able to pay off your balance in full each month. But that doesn’t necessarily mean that you can’t make on-time payments. If at all possible, try to make the minimum monthly payment on time each and every month.
Although sticking to the minimum monthly payment will prolong paying off your credit card debt, it’ll at minimum help keep your credit relatively intact. That’s because your payment history makes up 35% of your credit score — making that minimum payment critically important to the health of your credit score.
Use any rewards you have
If you have any rewards available through your credit card, now is the time to use them.
Many credit cards offer statement credits or gift cards to popular stores as rewards. Although it would be nice to save these points for greater value such as flights or free hotel stays, you should take advantage of the slight cushion these rewards can provide in a difficult financial situation.
Personally, I usually allow my rewards to accumulate for a big purchase of some kind or another. But in an emergency, those rewards points could save the day. Take a minute to jump on your credit card portal. If you find a cache of points, use what you have available if absolutely necessary.
Stick to your needs
Although this probably goes without saying, you should only use a credit card to cover the bare essentials during economic hardship. The fewer charges you can put on your card, the easier (and faster) it will be to pay off your debt.
The first reason to stick to the bare essentials is that fewer charges preserve your ability to extend the use of your credit as necessary. Depending on your credit limit, you could extend this reserve for weeks or months.
Beyond the preservation of spending power, limiting your spending will create a smaller hole to climb out of when sunny skies return.
Make a plan to get out of debt
Speaking of climbing out of that hole, you should start making a plan to get out of credit card debt now. Without a plan, it can be incredibly easy to slide into a mountain of debt that’s simply too big for your finances. But if you tread carefully, you can keep the end goal of paying off this high-interest debt in mind.
Although you are leaning on your credit card now, you should be brainstorming ways to pay it all back. That might include selling off big-ticket items around your house, permanently downsizing all of your expenses, or choosing to pursue a more lucrative career.
Here is a step-by-step guide on how to dig yourself out of debt in one year.
If you can find an alternative to credit cards, you should
Even if you use a 0% APR credit card to cover emergency expenses, there’s no surefire way to eliminate the potential of you paying the high-interest debt. Unless of course, you pay off your balance in full before the 0% introductory period ends.
That said, it is incredibly important to consider all of your other options before tapping into the available credit you have. If you are at the end of your financial rope, these other avenues could provide the reprieve you’ve been hoping for.
Ask a family member for help
If you have a family member or friend that you can rely on, consider asking them for help. Of course, their own finances may or may not allow them to help you out. But reaching out for assistance could help you avoid unwelcome interest charges.
Consider other loans
Personal loans and home equity loans, for instance, can offer single-digit interest rates if you have excellent credit. Plus, they offer a set repayment term that lets you know exactly when you’ll be finished paying off the debt.
Avoid payday loans
A couple of loans to avoid altogether include payday loans and auto title loans. Both of these loans typically charge triple-digit interest rates. Plus, you’ll generally only have two to four weeks before the loan comes due.
Consider a side hustle
Although a side hustle is likely not the silver bullet to solve your cash flow issues, the right side hustle could provide an influx of extra cash when you need it most.
The good news is that there are plenty of side hustles out there with a low barrier to entry. In fact, here are a few that you could dive into today.
If used responsibly, a credit card can help you cover unanticipated expenses. But it’s rarely a good idea to bank on it. Due to high interest rates and the lack of a set repayment schedule, putting emergency expenses on a credit card could end up crippling you financially.
Explore all other options to finance your emergency expenses rather than a credit card. As a last resort, if you must use a credit card, make sure to use one with the lowest interest rate, or better yet, pay your balance off in full to avoid paying interest.
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- Best credit cards for credit scores between 600 and 649
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