Are Multiple Credit Cards a Good Idea?

There are many people that have more than one credit card. There are lots of reasons why they might have this, but it is wise to think through the advantages and disadvantages of having more than one. You may decide that you would rather have less cards or that you should apply for more. Have a think about the consequences of each before you decide.

Having a lot of credit cards may mean that you have access to more credit. This is because each card will allow you to borrow up to a certain amount of money. However, lenders will look at your credit record when deciding how much to allow you to borrow. They will not want you to borrow so much money that you will not be able to manage the interest repayments. This means that they will limit what they lend. You may find that you could potentially borrow as much on a singular card as you could on a selection of cards, if you just spoke to your credit card company.

You may like to keep your cards for different types of purchase. This makes sense for cashback cards as some may give you cashback for certain types of purchases and some for others. However these are rare. If this is the case though, do be careful. Cashback cards tend to have very high interest compared to other cards and so only use them if you can make the full repayment each month, otherwise they actually could work out more expensive than other cards.
You may have some cards associated with certain stores where you can get loyalty points if you use them in store. Then if you shop somewhere else you use a different card to get loyalty points from there. This makes sense and as long as you pay them back in full and carefully keep an eye on what you are spending, you should be able to get a good lot of points. However, like cashback cards, these cards tend to have high interest and so you need to make sure that you pay them back in full each month to take advantage of the savings that you are making.

There is always the risk that if you have multiple credit cards that you might forget to pay them or that you may find it difficult to keep track of your spending. Therefore it is important to keep an eye on how much you owe on all of them. It is also wise to set up a direct debit to pay the full balance of each every month. To make this affordable, set the direct debit to come out just after you have been paid so that you know that the money will be there to be able to afford it.

You may find having lots of cards encourages you to spend more money. It is possible that you will think that you have access to a lot of money that can be spent, rather than thinking about the fact that the money is not yours, but is only lent to you and will cost you money to pay back. It is easy to forget about the costs of borrowing and how much the interest will be if you do not pay off the cards in full each month.

So multiple cards can be good for some people, but it is worth being wary. If you use them to get free interest or loyalty points then it is worthwhile. However, it can be easy to get into a muddle with regards to how much you owe and when each should be paid, so if you do not have a good reason for having more than one card, then it could be sensible just to stick to one card and try to get a higher credit limit on it if necessary. Remember to pay off each card in full to avoid interest or if you have too much outstanding debt, slowly pay back a bit extra each month until you eliminate the debt. It is worth comparing the interest on the different cards and paying off the most expensive first, so that you save as much money as possible.

What is Hire Purchase and should you use it?

Hire purchase is a way of borrowing money. You purchase an item, such as a television and then make regular payments towards it. While you are paying, you get to have the item and use it and when you have completed the required payments you get to keep the item. A selection of shops offer it as a way to buy items that you cannot afford in a lump sum, so you can spread the cost. It is similar to some other forms of lending, but it is important to understand the advantages and disadvantages of it before thinking about whether to use it.

Buying an item using hire purchase is usually much more expensive than just buying it with a lump sum of money. Of course, many people that do use hire purchase, do so because they do not have enough money to buy the item with one lump sum of money. Others feel that it means they will be able to keep their savings to fall back on as well as buying the item that they want. It means that they are able to buy something that they would not normally have. However, it is important to make sure that you know how much you are paying for the item. Consider the cost of buying it this way and whether it is cheaper to buy it as a lump sum. Consider whether you are prepared to pay that much extra money just to get the item straight away rather than waiting for it. It can be a difficult decision to make. It is often not just about the cost but how important it is for you to have the item.

You may find that alternative ways of borrowing money will be cheaper. An overdraft and credit card will tend to be expensive, but you may find that getting a secured loan could be cheaper than using hire purchase. Make sure that you compare all of the relevant rates so that you can get the best deal available to you. Also make sure that you compare the total cost of the lending including any set up fees, administration charges and things like that. It is worth considering what might happen if you miss a payment as well and whether the type of borrowing you have chosen will be flexible and allow you a little ley way when it comes to making the repayments.

It is worth thinking about the fact that all items available on hire purchase are luxury items. They tend to be electrical goods or furniture, all things which we can, in theory, do without. Obviously it is not nice doing without, particularly if other people have them, but it is possible. It is good to think about whether you really want to spend the money on this sort of item and in this way. Would you be happy knowing that you had paid more than necessary to get something when you could have saved a bit each month and bought it right out? Will you still like the item once you have finished paying for it? Will you feel like you have got good value for money? Consider whether you already have an item that works well and whether you are just getting a new one because you fancy one, yours is a bit old and dirty or whether you really need it.

Of course, using hire purchase could be a way for you to get items that you would otherwise not be able to afford. If you are no good at saving money, then you may never be able to put away a bit each month until you have saved up. Therefore this could be the only way that you could get those products. The products may be items that you really need as well, perhaps cookers, fridges or other white goods. Even buying a washing machine could be seen as necessary and it could be cheaper than having to visit the laundrette.

So whether you use hire purchase is a very personal thing. However, you do need to think very carefully about whether it is the right decision for you. Consider the costs and whether you really need the item. Think about what a difference it will make to your life if you have it and whether you are prepared to pay the extra money in order to get it this way.

Should you get a Loan if you have a Low Income?

These days it is possible to get a loan even if you are on a low income. This means that many people might be tempted to borrow when they may not have had the opportunity to do so in the past. This can open up opportunities for people, but it can also lead to trouble. It is therefore worth thinking hard about getting a loan in these circumstances.

Before borrowing money, whatever your income, it is worth considering whether you really need it. Think about what the money is for and whether it is something that is necessary for you to buy. Then consider whether you can wait for the item or if you need it right away. If you can wait a while, then you might be able to save up for it. If it is very expensive then perhaps you could save up some of the money towards it. Borrowing is expensive and so if you can reduce the amount that you borrow or avoid it altogether you will be much better off financially.

If you do decide to get a loan, then you need to think about the repayments. Consider whether you will have enough money available to make those repayments. You will need to calculate how much money you have coming in each month and how much you pay out to see whether there is enough left to cover the loan repayment. Consider that some months will be more expensive than others with some expenses only coming once a year, such as car tax and MOT, Christmas, birthdays, insurance and things like that. Will you be able to cope with this sort of thing on top of the loan repayments. They may go on for a long time.

It is well worth considering what might happen if interest rates go up. This could mean that your loan repayments will increase significantly. If you are on a variable rate, which most lending is based around, then it is extremely likely that your interest rate will go up when the base rate increases. This means that you will have to find more money each month to make your repayment. It is worth calculating what part of your repayment will be interest and how much of an affect it will have if rates go up. Calculate it for different increase amounts to see whether you will be able to manage even if they go very high. Bear in mind that you will find that your other expenses will rise as well over time and you may not necessarily get a pay rise.
Obviously some changes will also affect those on higher incomes. However, we all need certain basics to manage and if you are on a low income, a higher percentage on your income is spent on those, meaning that if you have to squeeze your spending, you may not have any areas to reduce it. If you are buying lots of luxuries then you can stop buying those, but o a low income, only the basics tend to be bought and so it is much harder to manage if you need to cut back.
Those on a low income will also be seen as more of a risk to lenders. This means that you are not only less likely to get a loan approved but you may not get such a good interest rate. As you are seen as a risk more money will be charged to cover any extra costs that are created if you cannot make the repayments on time.

There are some loans specifically designed for low income customers and those with a poor credit rating. These are extremely expensive and it is unwise to use these unless you are really stuck. Make sure that you have tried all other means of borrowing and that you are sure you will be able to make the repayment. Ensure that you really need the money as these loans should only be used in an emergency.

It is a huge risk getting a loan on a low income. Finding the money to make the repayments could be extremely difficult and you may be charged more for it. Make sure that you really need the money and the item you are buying with it before you borrow and that you are confident that you can make the repayments on time.