Credit Cards and Unemployment
Dealing With Credit Cards and Unemployment
Credit cards are one of the world’s most common forms of making payments for a variety of goods and services. Most credit cards are issued by banks that can be used anywhere, while other cards can only be used in certain stores. If you are unemployed, having a credit card can be difficult to manage. With the proper planning, you can stay on top of your payments and still manage your bank account.
Types of Credit Cards
If you are unemployed and need a credit card, you can choose from three types of basic credit cards, depending on your situation. These cards can help you improve or rebuild your credit, save you money on interest or help you get rewards and benefits. Some cards may help you in multiple ways, depending on the credit card company. Getting the right card and exercising financial responsibility can help you stay out of debt.
Credit Cards and Unemployment
Credit cards can seem like either a blessing or a burden to those who are unemployed. Credit cards allow you to buy necessities like food and clothing without necessarily having the money in your account. However, this can cause problems later if you do not have a source of income to keep up with your payments. Having a plan in place can help you manage your credit card spending and credit card payments.
Using a Credit Card When Unemployed
While you are unemployed, you will need to make sure you are extra careful about how you spend your money, especially if you use a credit card to make most of your purchases. It is always a good idea to have funds set aside to use in times of emergency, and unemployment is one type of emergency that you may need to prepare for. However, you do not want to go through your reserves before you have time to find another job. If you received a severance payout when you left your previous job, consider saving the money from that payment until necessary. If you have any outstanding debts, make the minimum payments on anything you need to and try to avoid using your backup cash reserves as much as possible until you absolutely have to.
You can also contact your creditors, and you should do this as soon as you can. Contacting your creditors means that you may be able to work out a deal with them where you pay a lower amount for your minimum payments until you can find work again. They may also agree to a later due date for payments or they may even suspend your payments until you are financially secure enough to continue paying them again. Although some creditors and lenders may not want to offer leniency, contacting them immediately, explaining your current situation and offering up solutions may convince them to be flexible while still allowing them to receive at least part of what you owe them. Some loans may offer payment deferral in times of unemployment or adjusted payment amounts,
One strategy to managing your finances while unemployed is to create a budget and stick to it. You can start by determining what the most important items are that you need to pay for each month, such as rent or mortgage, utilities, different insurances, various payments you need to make each month, such as for a car, and food. Once you have figured out how much you spend on necessities on a monthly basis, you can move on to other items, such how much you spend on hobbies and in your free time.
You can also apply for unemployment insurance benefits. You will need to qualify first, but if you do, you will receive monetary compensation until you find work again. You can also apply for other government assistance programs, such as the Supplemental Nutrition Assistance Program (SNAP). If you have children, you can look into different options your state government has. These programs will help provide a temporary source of income for you to use to manage your credit cards and payments while you continue to look for work.
Applying for Credit Cards While Unemployed
Even if you don’t currently have a job or a steady source of income, you can still apply for a credit card. However, it would be wise to limit yourself to only a few, especially if you have lost your source of income, as having too many credit cards and lead to more credit card debt in the future. If you are 21 years of age or older, the Credit Card Act of 2009 states that you can list other sources of income when applying for a credit card. For example, you can list other sources of income in your household, such as income earned by a spouse. You can also list Social Security payment, unemployment benefits, allowances, gifts, trust fund distributions, scholarships, grants, retirement funds and investment returns as sources of income on your application if they apply.
If the income you list on your application is not enough to qualify you for a credit card, you may still have other options. Asking someone to co-sign the application with could assure the bank. You simply need to make sure are ask someone who has a steady source of income. Even with a co-signer, you will still be responsible for making the payments on your credit card. However, if you fail to make payments, the responsibility will fall to the co-signer. A second option is to become an authorized user on a friend or family member’s account. This will give you access to a card linked to their account, but they will be responsible for making the payments. You actions can affect the credit score of the main account holder, so you must make sure to spend money responsibly. A third option is to get a secured credit card. These cards require a security deposit to use as collateral in case you cannot or do not pay your balance off. The amount you deposit as will become your credit limit, so make sure to choose an amount that works for you. Once you become employed again, you can close the account or upgrade to a regular credit card. If you do so, you will receive your security deposit back.