During economic hardship like the national emergency caused by the COVID-19 pandemic, a credit card may be a useful safety net. Social distance, Industry shutdowns, unemployment, recession: Because of the Coronavirus pandemic, the future remains uncertain as the virus has shown a lot of loopholes in our habits, planning, systems, and many more. Only one quarter into 2020 and the economic outlook of the nation have pivoted drastically downward. There have been losses for the majority of the businesses and many of them have either laid off their employees or have sent them on unpaid leaves.
However, how do you know if this is the right time to apply for a credit card? Know more which could be the best credit card for you during this uncertain time!
The entirety of accessing credit is that you can tap it when you most need it, and practicing good credit habits in good times means you will have flexibility when a disaster strikes. The credit cards are not a substitute for your income but in an emergency of such kind, you can use them to survive the tough times.
Here we will look into the 4 steps you should take when you apply for credit cards during a crisis like COVID-19:
Cutting down on your monthly expenses:
You should be taking all possible precautions to avoid getting into debt during such times. Get only what is essential for you, if you already have the basics in your pantry and cabinets, don’t worry about panic buying. Consider a limit to buy groceries and food, and try following it, this will save you money.
Cancel all the unnecessary holidays, luxury trips, your house repairing plans. Stick to the basics, don’t spend too much on buying items like shoes, clothes, etc. Many E-commerce companies like Amazon, Flipkart have restricted listing and selling of non-essentials items, furthermore, they have prioritized the medical goods and household supplies.
Strategically pay off the existing credit card debt
It is extremely important to strategically build up emergency funds and pay off your existing debts during this time, as it can mount more financial pressure if not planned meticulously. Transporting balances one month to another means paying more interest at annual rates of more than the normal rates. In this scenario, a balance transfer card with 0 percent introductory APR can help.
Rechannelling your expenditure like gym and other subscriptions; separating the non-essentials from the budget, these points will assist you in avoiding higher rates of interest on your credit card. Furthermore, calculate the amount you use from your credit card and weigh the option of whether to pay the credit month over month basis or yearly basis.
Find alternative income sources
The national quarantine has relaxed our schedule, offered us enough time to rest, spend time with our families, and self-reflect for many individuals. But due to the rise in people filing for their unemployment, and if your paycheck has been hit by the economic impact caused due to COVID-19, you might want to earn some side income. The dynamics of almost all industries have been changed over the course of the year, an online side hustle could ease your mind and help in relaxing the financial strain caused by solely relying on the credit card, which may have the highest rate of interest, which could possibly cause a long term financial stress for you.
There are many online platforms that offer freelancing as a service for people who have experience and expertise in certain areas, platforms like Fiverr, freelancer, etc. Moreover, many websites have given free learning videos and tutorials where you can learn the basics of almost any domain, get the certifications, and start working on it.
Prepare an emergency saving plan
Last but not least, you need to have a sound emergency savings plan. Credit cards open many opportunities for quick and convenient payments for unexpected purchases, but on the downside, if you don’t have the cash to make your payments on time, the penalty APRs and fees will get you to hit. It is advised to have minimum savings up to six months or higher than that for regular living and unforeseeable circumstances. If during the coronavirus outbreak you’ve already had to dip into your savings, resist the temptation of racking up charges on your credit card or overspending just to get a welcome bonus. Your credit card is not the emergency fund, use it wisely and astutely.
On a final note, take every chance to save on money whether it is your monthly gas expense or dining out spending, or maybe your trip cancellation refund. There are benefits of ownership when you apply for credit cards if you do consider the above points and make a solid plan for the situation. Additionally, you can redeem the credit rewards from your credit card for maximum value. You will be glad to have money in your pocket and remember that this tough time will pass as well!
We would like to end on a good quote “Hoping for the best, prepared for the worst, and unsurprised by anything in between.”