Want to come out better financially after the pandemic than you were before it began? Because of the financial difficulties associated with the shut-down there have been various attempts to get the economy going again. Learn how to use your stimulus payment to build better credit!
The moment you thought you were back in financial good standing, the pandemic came along and smacked you back down into the land of money woes again. Is this an accurate scenario?
For many people it is.
And, because of the pandemic, you have to pay more money than you expected to pay for everyday items.
Getting a credit card during this pandemic can be a real pain. It can really take a toll on your life and make you feel like you will never rise above it. So, learn how to use your stimulus payment to build better credit to help you come out of this pandemic in a better financial situation.
Consumers, there are many ways you can spend your stimulus check, but the best way will be explained below. The following tips will help you to improve your credit score during this pandemic.
First, set a budget. Figure out exactly how much you spend on the upkeep of your home. Compare each month’s expenses with the previous month’s to get a better idea of how much to budget for each necessity. Then, see what costs you can cut. Once you set a budget, stick to it.
Here are some strategies to help you set a budget:
1. Make a list of your monthly income. Include everything from your wages to gambling winnings, child support received, alimony, and any other income you get every month.
2. Then make a list of your expenses. List everything you spend from your utilities to your cell phone bill. Also your child’s violin lessons, pet expenses – everything.
3. Subtract your expenses from your income. Hopefully, you are coming out ahead! If not, then you need to make smart decisions on which expenses are a necessity or a luxury. Do you really need a cell phone, or is it just convenient? Discipline yourself now and you’ll thank yourself later!
4. Do this for several months. And then at the end of each month, figure out where your money went that was unnecessary. Did you go out to eat more than once a week? Did you buy your lunch instead of making a sandwich from home?
Whatever the situation, you were just clawing your way back to having control of your expenses when you pushed back down. Of course, the end result is debt!
- How do you deal with that mounting debt?
- What can you do to solve it?
There are many solutions and one of them is a secured credit card. We are going to show you the reason a secured credit card can help build your credit, and help you make spending decisions wisely.
The best to build credit with your stimulus payment is to invest it in a secured credit card.
A secured credit card is a credit card that requires you to place a refundable security deposit but otherwise works exactly like any other credit card. A secured card’s credit limit equals the amount of the security deposit in most cases.
Secured cards are great for people trying to rebuild their credit, or with limited credit. Most secured credit institutions offer nearly guaranteed approval and report information to the major credit bureaus every month.
So, putting a reasonable amount on this type of credit card can quickly improve your credit, while still giving you the ability to spend your stimulus on the things you need.
Benefits of Secured Credit Cards
- Approval is easier because of deposit there is a lower creditor risk.
- Payments are reported to credit agencies monthly just like conventional credit cards.
- Credit limits based on deposits reduce the risk of overspending.
- Proper use leads to getting approved for an unsecured credit card with a higher credit limit and no deposit.
Some of these secured cards will increase your spending limit if good spending practices occur, while others you can simply only spend what you put onto the card. Either way, it is a great way to be responsible with your money and start rebuilding your credit.
While you will likely not have many of the same benefits as traditional credit cards such as rewards, long grace periods, or even long introductory periods, you will still have the opportunity to get your financial affairs back on the right track.
Today’s Internet has provided the best opportunities to help you shop for the best price secured credit card rates. Proper analysis of rates and amortization goes a long way in saving even hundreds of dollars in a year.
You must always keep in mind that the secured credit cards have a set spending limit, and even though you prepaid for this card, you still have to make the payments on time, or you might find yourself in a much worse situation.
When you’re thinking about the best way to make your stimulus check work for you, consider learning how to use your stimulus payment to build better credit!
How to Apply for a Secured Credit Card
The steps of opening a secured credit card:
- When you apply, the issuer usually checks your credit and your income.
- You make a cash deposit with the creditor.
- The creditor places your deposit into a secure account that you can’t access for as long as the card is active.
- You pay your balance each month – or at least the minimum payment – the way you would with any credit card.
- If you miss payments, the lender withdraws from that account to pay the overdue balance.
If you miss monthly payments and the creditor uses your deposit to pay your balance, the effect on your credit score is the same as if you defaulted on an unsecured card.
Do whatever it takes to make your payments on time. A secured credit card can help you rebuild your credit, but if you don’t use the card responsibly, it can make your credit score even worse than it already is.
As you continue to use your card and pay it back regularly, you will increase your credit score. Then you can easily switch from a secured credit card to a traditional lower-interest card.
Are you ready to get started creating a better financial future? If so, check out the resources recommended to you by Inker Street Consumer Credit Advice.
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***The content contained on the Inker Street website is for informational and educational purposes only and should not be construed as professional financial advice. Should you need such advice, consult a licensed financial or tax advisor. We strive to write accurate and genuine informative articles, and all views and opinions expressed are solely those of the authors.