There are credit card rules to break now because of the pandemic. But should you go out and break every single one of them?
There is no denying that is has been a tough month for a lot of Americans. USA Today shares that unemployment is at 14.7%. This is over 20 million unemployed workers in the country in the past month alone. More than worrying about your health, you also need to look at your finances. Your work could be affected by business closures. If this is the case, you might slowly see your savings go down.
At best, you might still be working if you are part of an essential industry. Your employer might even have a way to help you work from home. If you are not so lucky, you can be put on furlough. You are on leave without pay and will be called back when its possible to go back to work. The worst-case scenario is when you are let go from work.
When you are let go, a million things start to race around your head. How will you provide for your family at this time? Where will you get the money to pay for all your bills? How much money do you have in your emergency fund? Do you have enough money in your savings to tide you through? Is it a good time to look at credit card rules to break now?
The health crisis is not your go signal to start breaking every financial rule you have leaned on in the past years. This includes your credit card use. But times are different now and there are some allowable exceptions to the general rule. Here are some of them to look into.
Never carry a credit card balance
If you are looking at credit card rules to break, this could be on top of your list. Remember though that it is still advisable to pay off your cards in full every month. This is to help you stay away from avoidable debt. If you carry a balance on your card, your lender can start putting interest, fees, and other penalties on your succeeding payments.
That being said, these are trying times and you could be working with a shoestring budget. It might come naturally that you cannot pay for all your card balances. It is also possible that you have the funds to do it but you choose to stay liquid. There are a lot of variables to think of at the moment where it all boils down to pushing full payment on your card further down your priority list.
This will result in carrying a credit card balance for a few months. It is not ideal but it is better considering the pandemic. You need to make sure that you have food on your table and a roof over your head. You might also need some medicines to help you manage existing medical conditions. These are some of the reasons why you will have balances on your card.
Never settle for the minimum payment
When you start talking about credit card rules to break, this could be a popular topic. Paying the minimum on your cards is something you could have been avoiding all these years. This is also connected with the rule of paying the total every month. To be able to do that, you need to watch what you charge. This will help you budget your money and pay the entire amount.
With the health crisis on-going, this will need a revisit. This is because minimum payments can offer you flexibility with your finances. There is no denying the fact that a lot of people are having a difficult time with their finances. That can include you when your income is affected. When you are trying to stretch your finances
Rather than overlook your payments, the least you can do is settle the minimum payment on your card. This will help keep your cash on hand or emergency fund intact for other needs. Making minimum payments keep your account up to date. You might have to deal with a few interests and fees later on. But this is better than not paying at all. That can hurt your score and make it a lot harder to access a credit line later on.
Use your card to improve your score
Your credit card is one of the most effective tools you have to improve your credit score. One of the biggest factors in score computation is your payment history. If you stick to your payment schedule and pay on time, it will be a positive on your score. Your credit card helps you to accomplish just that. But these are trying times and it has changed how people manage finances.
This is usually not one of the credit card rules to break but it becomes less of a priority with the pandemic. Make no mistake in thinking that your credit score is no longer important. It is still important especially when you need to open new lines of credit. But when you need to make a choice between your credit score and your essential needs, the latter takes precedence.
This is not a license to miss and overlook payments left and right. That will not solve a thing. If anything, it will only complicate your situation even further. This just helps you put things in perspective. You do not have to worry about sending only the minimum payment or paying a bit late. There will be times when you can reach out to your creditors to ask for payment extensions. A lot of them be open to such requests considering the health crisis.
Your credit card is not your emergency fund
A lot of people have different views when it comes to their credit cards. Some use it to make the most of the rewards it offers. Other people prefer to use it compared to cash transactions. There are also some consumers who use their cards for all their online transactions. Since most shops are online, it is a lot more efficient to use credit cards when paying online.
But during this pandemic, one of the credit card rules to break seems to be the way you use your credit cards. In particular, using it as the source of your emergency fund. It is a big risk when you start using your credit cards without any concrete plans of paying it back at the end of the month. This is where your card debt usually begins. Even with savings, Fobes shares that you need to use your emergency fund as wisely and slowly as possible.It is a tough call but one that you might need to make from time to time. If your income is affected by the crisis, you could be running low on funds. As such, you might start to resort to using credit to preserve your cash on hand. Just make sure that you pay your statement at the end of the month. At the very least, make the minimum payments to stay ahead of big penalties.
There are a lot of credit card rules to break when you find yourself in a financial crisis in the middle of the pandemic. It is not a go signal to rack up debt and just worry about payments when your finances go back to normal. You still need to make sure that you are spending within your limits but there will be times when financial priority takes precedence over credit card rules.