Credit lines are designed as a revolving credit product to help you manage your money and any cashflow shortfalls that crop up throughout the year. While they aren’t a long term solution to income reductions or expenditure increases, they can help from time to time when unexpected bills come through the door or in the case of temporary financial difficulty.
The idea is you can withdraw money up to your credit limit to meet your expenses, and then you repay the balance at the end of the month on your payday. If you can’t afford to repay the balance in full one month, there is the option to make just a minimum payment which is made up of the interest accrued on the amount borrowed, the transaction fees and a proportion of the principal amount borrowed. So, if you had a particularly large expense, you shouldn’t be put into further financial difficulty by having to repay the entire balance in one go. However, you should always aim to pay as much of your balance off as you can afford. This will reduce the amount of interest that accrues and will increase the amount of available credit in case of future cashflow needs.
In the months leading up to Christmas, the smooth, everyday running of your finances can be temporarily interrupted. Doing a huge food shop for all the family or buying presents for the children doesn’t come cheap and sometimes the stress of your financial circumstances throughout the festive period can make the whole time much less enjoyable. While it can be tempting to borrow money to help see you through, it’s not always a good idea. Normally, you should only be borrowing money in emergency situations and when you know you can afford to repay it.
Despite this, spreading the cost of your finances over Christmas by using low-cost credit can be a sensible option if it means you can maintain all your current financial commitments. There are several ways of doing this:
Ultimately, we wouldn’t encourage the use of your credit line to do your Christmas shopping. You should try to save up throughout the year so that you are spending money you have earned rather than borrowing money. If you do need credit to see you through, try to find the cheapest possible way of borrowing because the last thing you need after Christmas is a huge bill in January.
Ideally credit lines are a safety net for when things go wrong and they are not an extension of your income. Of course, you know your financial circumstances and your ability to meet your repayments so how you choose to spend your credit line funds is entirely up to you. Just make sure you do a comprehensive budget for the next few months and you include all your planned priority bills and annual payments before calculating if you can afford to take out credit. Missing your repayments can cause serious money problems and not even Christmas is worth long-term financial difficulty.
For more great money management hacks and sustainable borrowing information, check out our Info Hub.