Are credit cards and lines of credit a responsible way to pay for your holiday spending? The answer is yes, but you must know how your credit card or loan works to ensure you use them wisely.
Credit Cards
Using credit cards during times of inflation can help you build credit. The key to spending responsibly and building credit is paying off your credit card balance every month. The interest rates on credit cards can be very high, and only paying the minimum amount required can quickly cause you to accumulate debt. In addition to paying off monthly balances, you can use your credit card wisely by:
- Timing your spending. Know your credit card’s closing date and time your purchases for just after the closing date. That will give you an extra month of “float” before your payment is due.
- Transferring your debt from a higher-interest credit card to a lower-interest card.
- Getting a credit card with rewards that work with your lifestyle.
Lines of Credit or Personal Loans
Lines of Credit (LOC) or personal loans can be secured or unsecured. Secured loans require collateral. Collateral is a personal asset that the lending institution can acquire if you default on the loan. An unsecured loan requires no collateral.1
An example of an unsecured line of credit is a Holiday Line of Credit. This type of credit line is often offered only during the holiday season. Special terms such as an extended first payment date and revolving, “open-ended” credit line may apply.
Personal loans can also be acquired anytime, with or without collateral. The loan amount, APR, and repayment terms will depend on whether the loan is secured or unsecured and the borrower’s credit score.
Be Informed and, Therefore, Responsible
Holiday spending can be challenging. Setting realistic budgets and utilizing innovative spending tools is one way to stay responsible and financially healthy. Investigate your options and choose the credit card and loan type that works best for your lifestyle. At Welcome Federal Credit Union, our friendly and well-informed staff can review your options with you. Make an appointment for a Financial Health Check today!
You are always Welcome!
1 https://www.forbes.com/advisor/ca/personal-loans/secured-vs-unsecured/