The common personal finance guidelines protect people from accumulating debt during regular financial conditions. People should avoid carrying debt and need to stop using their credit cards for cash and they must not pay less than the full amount required. People need to stop accumulating wealth because they face a real financial crisis which requires them to focus on basic survival instead.
The “Never Carry a Balance” Rule
The normal procedure requires you to pay your total bill amount each month because this method prevents interest charges. The normal payment requirement permits you to handle expenses during an emergency situation when your cash needs for essential items such as rent and food require you to carry debt for three months. People need to pay interest charges because this expense provides them with essential safety.
The “30% Utilization” Rule
Experts recommend that people should not exceed 30 percent of their credit limit because doing so will damage their credit score. Your credit score takes a back seat in emergencies. If you need to “max out” a card to fix a broken car so you can get to work, do it. People can restore their credit score but it takes longer to recover from job loss.
The “No Cash Advances” Rule
Cash advances charge borrowers with extremely high interest rates because they lack any grace period. The cash advance serves as an emergency solution when someone faces eviction because their landlord or utility company only accepts cash or check payments. People should pay the 25% charge instead of remaining without power.
The “Pay More Than the Minimum” Rule
People learn that making minimum payments leads them into permanent debt situations. The necessary payment for groceries becomes essential because you need food more than the credit card. The account protection allows you to maintain good standing while ensuring that you have access to food.
The “Avoid New Credit” Rule
People who need financial help should not apply for new credit cards. People with good credit should consider getting a 0% APR Balance Transfer card because it allows them to handle expenses which provide them with a 12 to 18 month period to recover from financial setbacks.
The “Never Use Credit for Essentials” Rule
Financial experts advise people to use cash for grocery purchases instead of charging them to their credit cards. Your credit card functions as your emergency fund during urgent situations. Essential purchases allow you to keep your cash reserves intact for things which cannot be bought with a credit card.
The “Don’t Close Old Accounts” Rule
The process of closing accounts will decrease your total credit history time. You should close the old card because its annual fee exceeds your current budget. People should prioritize saving money when they face financial difficulties because a credit report will only give them a few points as a result.
The “Don’t Call the Bank” Rule
People tend to avoid contacting their bank because they experience feelings of shame. Bring forth the information to the public. People who describe their emergency situation will receive immediate assistance from most banks through their “Hardship Programs” which provide both interest rate reductions and payment pauses.
The “Avoid Credit Repair Services” Rule
You need to handle it by yourself. The financial emergency has made your situation unmanageable so you should get professional assistance to deal with your ownership rights that creditors are currently claiming.
