How to Use Credit Cards Smartly when You are Unemployed?

Posted by Alice on September 20th, 2019

When you lose your job, you get in a tight spot. Meeting all regular expenses from food to utility bills becomes all but impossible. Having an emergency cushion seems like an unfulfilled dream due to high living cost and low wages. You lose your job while you do not have savings. Of course, survival is tougher unless you land a new job.

After losing a job, Cash loans for unemployed in Ireland is the only option left. Not all direct lenders will sign off on your application and if they do so, you need to prove your repayment capacity through side gigs. When you are unable to access funds through unemployed loans, credit cards are the ideal option for financial support, but you need to be very careful with their use.

Use credit cards when necessary

As long as you have constant flow of cash coming in, you can use your credit card to make any purchase. Whether you fund unforeseen expenditure or make a larger purchase, you can pay off the debt in time. In fact, many people use credit cards to buy anything because they do not want to carry cash for one reason and the other. When you are unemployed, your outlook should shift from spending to conserving.

Of course, you cannot continue to use your card the same way as you used to. Otherwise, your credit card limit will exhaust and you will not be able to use it in case an unexpected expenditure rises.

During unemployment, you do not have those earnings coming in. You will rely on unemployment benefits and they are unlikely to last unless you land a new job. Therefore, you need to be very careful with your spending. The rule of thumb says that you should not use your credit card as long as emergency does not crop up.  

Create a realistic budget

When your income sources whittle down, you should cut back on your spending. It is not just discretionary expenses but essentials too. As you lose your job, sit down and jot down all income sources. Whether it is rent or stipend, every penny matters a lot when you are out of work. Make a list of all of your expenses.

First, cut down on all discretionary expenses such as dine out, entertainment etc. Cut them back completely so that you can use that money for your other essential needs. You will also have to figure out where you can trim down your essential expenses. Try to buy fruits and groceries from a wholesale shop provided you are able to consume all of them before they go rotten. Make do with whatever is available with you as long as you can. It is not necessary that you invest in your clothes even if they are scruffy.

Budget will help you understand where you stand. Try to manage all of your expenses with the cash available with you and if you encounter any unexpected expenditure, use your credit card.

Repayment plan is a must

Of course, you need to pay off your debt whether you take out an unemployed loan or use your credit card. You must have a repayment plan to make sure that you do not fall in a predatory debt cycle. If you suspect your affordability, you should try to seek help from your friends and family.

Many people withdraw cash through their credit cards, but never take out cash advances. Your credit card company will charge a very high amount of interest. It accrues from the moment you withdraw money.

Instead, you should take out unemployed loans. They are a better option than cash advance. If you want to borrow money with a direct lender at lower interest rate, you should arrange a guarantor with a good credit score or put collateral. It minimises the risk of the lender and therefore they get ready to lend money at lower interest rates.

The bottom line

When you are on benefits and stipends, you will face difficulty meeting all of your regular expenses, let alone unforeseen expenditure. Having an emergency cushion is important as it helps you tide over when you are out of work. Start savings as soon as possible.