Monday, May 20, 2019
Credit Cards

What is a Good credit Limit for a Credit card?

Many people, when they get a credit card, hope to have a really high credit limit so that they can use it to buy as much as possible. However, this may not always be the most sensible idea, it is worth thinking hard about what might work best for you. Understanding how the card works is a good place to start and then getting an understanding of how to use a card to your advantage and how to avoid problems with them so that you can decide on the right credit limit for you.

How a credit card works

A credit card is a way that you can borrow money or delay paying for things that you buy. You can buy things using the card and then after around a month you will get a bill. You will then be requested to repay the minimum balance owed, which is usually just the interest plus a little more or you can pay any other higher amount up to the whole outstanding balance. If you repay everything you pay no interest and if you pay less than this you will be charged interest on the outstanding balance. Interest on credit cards can be quite expensive compared to some other types of loans and so if you intend to use it and not repay for a while then think about whether this is the best option for you or whether you might be better off trying something else.

Best way to use a credit card

As you may have guessed, the best way to use a credit card is to repay it in full each time you get a bill. You can set up a direct debit to do this and then you will not have to worry about repaying it at all. A credit card can give security when shopping and so it can be advantageous to use it over a debit card or cash. This is because it has insurance on it which means that if your goods are faulty or do not arrive (when ordering online or mail order) you will get your money back if the retailer does not reimburse you. This can be really handy, particularly if you are buying online and means that you do not have to be so nervous when you are ordering form companies that you have not used before. The cards are also more secure than debit cards when using them online and so they can be handy for these purchases too.

Some people will therefore just use their cards of online purchases so that they can take advantage of the security and insurance. Some use them for everything. It is wise to think about how to use yours. The best way is probably to use it for everything so that you can delay paying for it, but set up a direct debit to pay off the outstanding balance in full every time that you get a bill.

Problems with credit cards

Problems come with credit cards when spending gets out of control. It can be too easy to use them for buying too many things so that when you have your bill there is not enough money to repay them. Some people can easily get carried away as they see the money available on the credit card as theirs to spend on whatever they like. There are others that do not have this attitude but spend on it without keeping a check on the balance and accidently spend more than they can pay back. This is where the credit limit becomes important. If you set a limit that you can afford to repay then you should never get into the situation where you will need to not repay the bill in full because you cannot afford it. It can be tempting to have a high credit limit so that you have the money available if you need it but beware if you do this and make sure that you do not overspend on the card.

It is also important to think that every penny that you do not pay back will attract interest and so will be costly. Therefore if you have a high credit limit and spend more than you can afford to pay back, you will have to pay interest on this. This can really add up if you leave the card unpaid for a long time and effectively will mean that the things that you bought with the card will be costing you more money. You may not have bought those goods if they had cost that much more, but now you are paying extra for them after purchasing them. Therefore think carefully about what you are using the card for, keep your spending on track and set a low credit limit to reduce the risk of your card going unpaid.

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Payday Loans

Is a Payday Loan a good Way to Cover Christmas Costs?

At Christmas time we encounter lots of extra costs. Not only is there the cost of presents we also buy and post cards, buy decorations, extra food, travel more and often buy new clothing as well. We may have parties to pay for and work Christmas meals as well. These can really add up and it can mean that many people find it very difficult to manage their money and look to borrow money in order to help them. Although borrowing can be a solution it is not always a wise one and so it is best to think hard about it first.

– Is it necessary? – with all borrowing it is always good to ask yourself whether you really need the money. If you are borrowing to pay for decorations, clothing, extra food, gifts and other Christmas luxuries then it is less likely that it is really necessary for you to spend the money. Obviously we are all different in what we consider to be necessary and so it will be a very personal answer. Try hard to think about whether you can cut down, earn some extra money or spend less elsewhere so that you can keep your borrowing to a minimum.

– Can you afford to repay it?- you will usually have to repay a payday loan in one lump sum. This is usually set up by direct debit to go out on the day that you are paid so that you have the funds available to repay it. It is worth thinking about how you will manage once that lump sum has gone though. Consider whether you will then be able to stretch the remaining money until you are next paid. This will depend on how much you have to repay and whether you are expecting any large expenses the following month.

– Is it worth the cost? – it is always worth calculating the cost of a loan. This will allow you to see whether you feel that it is worth it. Imagine that the items you are buying with the borrowed money are that much when you buy them and whether you would be prepared to pay that much money for them. You might be completely happy with doing this, but you may not. Only once you have worked it out can you make a decision as to whether you feel it is worth paying the extra.

– What are the risks?- there are risks with all loans. You may struggle to repay it and find that you get charged for late or no repayment and the costs rise and what you owe grows. You may then find that tis will impact your credit record meaning that it will be harder for you to borrow in the future. There is also a risk that you nay not be able to manage your money well once you have repaid the loan and that you need to have another one in order to manage and this could potentially happen for many months, costing a lot of money and causing a lot of stress.

It is always worth thinking hard before taking a loan. After deciding whether you really need to borrow the money you need to decide whether this is the best loan option for you. A payday loan does no credit check so is really aimed at those that do not have a good credit record and so have no other borrowing options. However do not assume that a payday loan will always be the dearer option. Make sure that you do compare prices as you could find that there are more expensive options out there as well as potentially cheaper ones. By comparing loan types and then payday loan providers you should be able to get a good deal.

So if you have alternative borrowing options to a payday loan then compare the prices so that you can work out whether a payday loan will be cheaper or not. You may find that it is not that dear as you will not be borrowing the money for that long compared to some other forms of borrowing which are more long term. However, think about whether a short term loan will suit you as you will have to repay it very quickly and so you will not have much time to find the money and it will be a big chunk all at once. If you are using it for Christmas it will be January when you have to pay it. This can be tricky as often people get paid early in December and so the wait for the January pay check can seem never ending and then if you have a loan to repay as well it may just not go as far as you had hoped and you could struggle again.

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