After eighteen months of lockdowns and restrictions, things are starting ease and people are beginning to feel more comfortable travelling. Whether that’s the daily commute to work on public transport or a quick getaway on a plane; Covid-19 is presenting less of a threat as more and more people become fully vaccinated against it.
However, the pandemic has not just halted travel plans, but for a lot of people, it has also affected income and financial stability. Some have lost jobs or had hours reduced, causing them to rely on savings from before the pandemic. As we return to normality, many don’t have the same financial resilience they used to and adjusting to a different way of managing money isn’t easy. This is especially relevant when it comes to leisure spending and recreational activities. Money for holidays just isn’t as available as it was before and in place of savings, you might be thinking of using credit.
While holiday finance has long been around and there is more than one way to manage repayments for large expenses, this doesn’t mean that all types of credit are suitable for all purposes. A credit line is a revolving credit facility, like an overdraft or a credit card. Yet an overdraft and a credit card are deemed very different types of credit and while you might use the latter to pay for a holiday, using an overdraft for the same thing might seem inappropriate. So, how do you know whether to use your Polar Credit line to pay for a holiday?
There’s no blanket rule to knowing when to use credit that can be applied to everyone because credit is dependent on individual circumstances. For example, if you have a 0% interest rate credit card, you’re much more likely to use that credit card for everyday spending and one-off purchases because you know it won’t cost you in interest to do so. Whereas if you have a high interest rate credit card, you’ll probably only use it for emergency payments. How you manage your money will depend on your income, how frequently you are paid, your expenditure and your ability to save money. If you have a low income and high expenditure, you’re less likely to have built a substantial savings fund that can be used in case of emergency or even for large purchases like a work vehicle, so you will probably rely on credit to finance these things. If you have a high income and low regular spending, then cashflow shortfall is less of a concern and so you can be less restrictive with your budgeting and less reliant on credit.
Unfortunately, this is one of those questions where the answer isn’t clear cut. Holidays aren’t classed as essential so it may be considered ill-advised to take out expensive credit which will cost you money in interest to pay for one. However, many people split the cost of a holiday over several months in order to make the payments more manageable, and if you have a low interest rate finance option available to you, then it may be considered a reasonable choice to make. Unfortunately, it depends largely on your financial circumstances and your financial resilience. If making the repayments for the holiday is going to cause you financial difficulty, then you shouldn’t be looking to use credit to finance it.
Polar Credit is a revolving line of credit which you can use to manage monthly or one-off purchases. If you’re certain you can afford your credit line repayments, then it’s essentially up to you to decide whether you would like to use your credit line to pay for a holiday or if you’d rather reserve the funds in case of an unexpected or emergency cost further down the line. Credit should primarily be reserved for assisting with essential costs and payments that can’t be avoided, but if you have more than one credit facility or even an emergency savings fund to rely on instead, then you can be more flexible with how you use your borrowed funds, especially if you know the repayments won’t cause you money trouble in the following months.
It’s important to remember that interest is charged for your borrowing, as well as transactions fees, so you should only take out the amount of credit you need when you need it to avoid paying additional costs. You should also consider that using credit unnecessarily could cause financial difficulty as you may not have any available credit when it’s required if you haven’t paid a sufficient amount back.
While a Polar Credit line is accessible and easy to use, it’s always worth conducting research ahead of withdrawing your funds in case there is a cheaper or more suitable alternative available.
The best revolving line of credit might not be the most commonly used or the cheapest, but the one that works the most effectively for you and your financial needs. If you only need to borrow a little bit of cash here and there, then a credit line may be a good option. But if you’re intending to finance a large project where added consumer protections would be practical, then you’re more likely to favour a credit card. Without knowing your personal circumstances, it would be difficult for any third party to advise on the best way to manage your money and how to use credit to your advantage. Having a sustainable budget and a realistic expectation of what you can and can’t afford is usually a good place to start.
More questions? Check out our Info Hub.