The unnecessary use of credit cards or personal loans is the reason for the financial troubles of people. Financial experts recommend people rely on savings to avoid interest. However, you will find the use of credit makes more sense in certain situations instead of tapping into your savings.
It is indeed a confusing concept since the use of credit or saving is not clear from the nature of the expense. The impact on your financial condition and stability will determine the decision. Here, we have tried to clear the concept by explaining a few situations where the use of different methods is recommended.
When to Use Credit for an Expense
People should understand the real reason to use credit instead to make the best use of it. Otherwise, you may end paying significantly more for some needless expense in the long run. Here are some situations where you should use a credit card or quick cash loans in Ireland.
To Improve Credit Profile
Your credit profile will contain the previous debts and repayment history. Lenders will consider you responsible with money only if you repay the debts on time. Therefore, the frequent use of credit cards or loans for small purchases can help improve your credit profile.
Remember, you should take small loans to improve your credit profile since the repayment is easy. The longer duration will involve the risk of financial trouble before the loan is repaid. Therefore, you may miss a few payments to damage the profile instead of improving it.
Avoid the use of credit cards for frequent transactions if you already have a good credit score. Instead, apply for a personal loan to get better interest rates to save money on the overall cost. For defaults in the past, you should consider bad credit loans in Ireland from a direct lender.
For Loyalty Points
The use of credit cards for frequent transactions can help you get discounts in the future. These service providers offer points for every transaction as a reward for using their services. After a few months, you may collect enough points to order something for yourself for free.
The strategy for service providers to offer the points results in heavy transactions from their cards. The downside here is the excessive use to make you addicted to the use of credit. Keep in mind the need for the product or the budget before using the credit card to get special discounts.
It can take years to save money for large purchases or long-term goals such as cars and houses. Even the major home appliances may require an unnecessary time to buy them from your limited savings. Here, the credit or loan may seem like the only feasible solution to avoid the long wait.
Most people take mortgages to buy a house after saving a significant amount for the down payment. You cannot wait to save enough money if the refrigerator in your kitchen is broken beyond repair. However, the latest model of your favourite gadget can wait until you save enough for it.
Therefore, the focus should remain on the requirement of the product before taking a loan for it. The larger purchase will come with heavy instalments that may derail your current budget. Also, you should keep the savings for an emergency instead of procuring an asset.
We want vacations to relieve the stress accumulated because of our busy professional and personal life. The cost of vacation may force you to cancel the plan every time. However, you can save money on the booking with the use of credit cards.
The service provider offers discounts on the booking of hotels, flights, and other services. Many cards also provide complimentary access to the airport lounge to wait until the boarding time. Also, you can use the reward points to reduce the final bill.
If not the credit card, you can take vacation loans from lenders to pay for the sudden plans. You deserve a break over the weekend to recharge your mind and body to counter the daily problems. The instalments are manageable for the period of your choice with lower interest rates than credit cards.
People may not suggest the use of credit cards for online shopping because of unnecessary spending. However, online sellers and credit card providers offer great discounts on the use of cards for purchase. It is one of the easiest ways to find deals on the items you need.
Again, the major concern with the use of credit cards for online shopping is impulse decisions. The offers on credit cards may remain for another day, week, or even month. Therefore, take at least 24 hours before completing the transaction after adding an item to your cart.
When Not to Use Credit
You may understand the benefits of using credit for some expenses. Nevertheless, it is one of the major reasons for the financial crisis around the globe. Here are some situations where the credit or loan will only increase your financial troubles.
You should not trust the sellers on the internet without proper research because of the increasing online fraud. They will offer special discounts or products unavailable in your area to stand out from the crowd. And you may never receive the shipment and end up paying the amount along with the sensitive information.
Moreover, the pictures of products are often different from the actual delivered item to your doorstep. Do not trust the word of unknown sellers without even the HTTPS certification. Always check the reviews of the products or sellers before you trust them with money.
Another concern is the use of your credential for financial fraud. They will ask for account or credit card details to access the account and leave no money for you. Thus, always use credit cards or other sensitive information on trusted websites.
Near Credit Limit
Put your credit card on hold if you are near the credit limit. Not only you are spending more than your budget, but it may also incur unnecessary charges. Your service provider may charge some amount for an overdraft if you have opted for it.
Moreover, the interest rate on the overdraft amount is often exorbitant to increase the overall cost. You can avoid this needless stress on your financial condition by not using credit cards near the limit. Either avoid the purchase or take small loans with lower interest rates and charges than an overdraft.
Items Beyond Affordability
The temptation to buy some popular items can take hold of your reasoning to maintain the budget. You may not have enough in the savings account to pay for them. However, the credit card will give a false sense of affordability to complete the transaction.
These purchases are the major reason people avoid the use of credit cards during shopping. You should always take cash or debit cards to make sure the cart contains items only from the list. Moreover, do not let the salesmen convince you of the savings from an unnecessary purchase from the use of credit cards.
Retail therapy is the solution for the overwhelming stress for some people by visiting their favourite stores. It may give temporary relief because of the new items in your house or wardrobe. However, the result is long-term debts and a constant need for credit.
You should avoid retail therapy, especially with a credit card. A splurge is okay now and then to get rid of the mental fatigue because of constant budgeting. However, you should keep in mind the consequences of these splurges to make sure they won’t hurt your progress.
To Repay Debts
A debt situation can make people take another debt only to manage the instalments of existing ones. It makes no sense to add another liability to put further stress on your finances. However, it may seem like the only solution if you don’t want to cut the expenses to save enough for the minimum repayment amount.
You must spend some time on budgeting and planning to cut the non-essential expenses from your lifestyle. Take an aggressive approach towards debt repayment to manage the instalments from the limited income. More importantly, do not take any more debt to manage the instalments or repay the existing debts.
Instead, you can try debt consolidation loans from direct lenders to simplify the repayment of multiple debts. It is a financial product that people use to repay their high-interest loans to reduce the overall cost. Moreover, you will have only one instalment to take care of with a reduced chance of missing the payments.
To sum up, you should consider the impact of purchase from a credit card or loan before completing the transactions. The deals may sound tempting, but they may put unnecessary stress on your financial condition. Moreover, the benefits are only available if you can afford the product or instalments from your income.