Using Credit Cards Responsibly During a Crisis
Abrupt events that can impact our financial well-being are always a possibility. Whether it’s a natural disaster or a global pandemic along the lines of the COVID-19 (coronavirus) crisis of 2020, an individual’s or family’s financial security can be wrecked through no fault of their own.
Good financial planning that foresees future disruptions includes the need for creating and maintaining an emergency fund. Even if you have taken steps to safeguard yourself against a crisis, a damaging financial event that includes the loss of a job can drain even the best preparation.
Several sources including MarketWatch examine the possibility of using credit cards — strategically and only for a short term — in order to get through a financial crisis. There are important considerations that come along with this, including the pitfall of racking up high-interest debt that can put you in a more precarious financial situation. For anyone who already faces any sort of debt, adding more through even the slightest use of credit cards might not be the best option. For assistance in those cases, RBFCU is a partner with GreenPath, which is a national nonprofit focused on financial wellness. GreenPath offers a people-centered approach, ambitious goals, and creative strategies that sets the program apart. GreenPath is far more than a credit counseling agency.
Important advice on carrying credit card debt responsibly during a crisis that comes from creditcards.com includes trying to find ways to make extra money. This is very important as you pay your debt down and make your bank account grow.
When you’re faced with a short-term disruption to your earning power, a credit card can be an accessible way to ride out the storm while keeping costs low. Here’s how according to MarketWatch:
The cash you do have during a crisis can pay mortgage, rent, auto loans and utilities. Using a credit card for purchases, planned for in a budget that you will stick to, can make your cash reserves last longer.
If you’ve been paying your credit card bills in full up to now, you can buy some time interest-free by making use of your grace period. When you pay off your entire statement balance, new purchases won’t start gathering interest until your next statement’s due date. That means you can get approximately 50 or more interest-free days between making a purchase and paying it off: the 30 or so days in a typical billing cycle, plus the 21 to 25 days between the end of the cycle and the due date. Check with your credit card issuer. Know what your grace period is. Know that if your balance is not paid in full each month, you accrue interest on the first day of the next billing period.
Buying time at lower interest
It’s not ideal to carry balances on credit cards with high interest rates. If you carry a rewards or loyalty card that gives back cash or travel points, consider forgoing those perks for now and switching to a card with a lower interest rate. A credit union like RBFCU can offer you a card that fits your current lifestyle, including a lower interest rate.
Reducing the cost of existing debt
Moving a balance you owe from a high-interest rate credit card to a credit card that offers a lower APR is often a good financial move that can lead to beneficial results. A credit union can offer promotional introductory APRs on Balance Transfers, allowing you to pay down debt with lower interest charges for a set period of time.
Information in this article is general in nature and for your consideration, not as financial advice. Please contact your own financial professionals regarding your specific needs before taking any action based upon this information.
Membership eligibility required. Credit cards are subject to credit approval. Rates and terms subject to change.
Cash back is an enhancement to the RBFCU World Cash Back and Business Select Mastercard credit cards and may be discontinued at any time. Program availability, rates and terms are subject to change. The Cash Back rewards program pays a reward for each qualified purchase completed with your Card. ATM withdrawals, Balance Transfers, Cash Advances, finance charges, fees and any other non-purchase transactions do not qualify for rewards. The cash back is redeemable online, and payment of the reward may be made as a statement credit. Cash rewards are forfeited if your Card is closed before redemption. We reserve the right to disqualify transactions that are not usual or customary and are apparently structured or intended to abuse the program. Abuse of the program may result in loss of rewards and Card privileges. We may add to, change, or delete any of the terms of this program or discontinue this program at any time at our sole and absolute discretion.
An authorized user is an individual who has charging privileges on a credit card account even though he or she is not the primary Cardholder. The primary Cardholder is solely responsible for the Account. The primary Cardholder must notify the authorized user that the Account will be reported to a credit bureau and thus will show up on their credit report, which can affect them positively or negatively, depending on how the Account is handled. You agree to pay for all purchases, Cash Advances, fees and charges resulting from any transaction made by an authorized user on your credit card Account. If an authorized user wants to be removed from the Account or if the primary Cardholder wants to terminate that person's privilege as an authorized user, either party may contact us to submit the request.
By providing us certain personal information about each authorized user, you confirm each authorized user has provided you permission to give us their personal information before naming them as an authorized user on your Account. This may include, but is not limited to, name, address, Social Security number, date of birth and citizenship status.