WBC Money Loans and lending tips.

How Many Store Cards is an Acceptable Level?

If you like shopping and have a lot of favourite stores then you might consider or even have store cards for all of them. This might mean that you have a big selection of them and you may wonder whether that is too many or whether you should even get more. It is worth thinking about the pros and cons of store cards as well as your own spending habits so that you can make the right decision.

Advantages of store cards

Some store cards have a lot of advantages and others less so, depending on the store that issues them. All store cards will allow you to shop now and pay later. This means that you will get a few weeks of interest free credit until you get the statement. Then you will have the choice of repaying the card in full or paying off less than you owe and staying in debt. You will pay interest if you do this and keep paying it until the debt is fully repaid, but as long as you repay the minimum you can keep the debt as long as you like. This means that you are able to buy things that you would not normally be able to afford and spread the cost. Many people enjoy this and are happy to pay for the privilege rather than saving up and waiting to buy what they want.

Stores will often give their store card holders special offers. They may get early access to sale prices, special evenings where they can shop just with other card holders and possibly discounts on what they buy. These will vary depending on the store. It is good to find out what these might be before you sign up to the card so that you can decide whether they will be things that you will be able to enjoy and take advantage of.

Disadvantages of store cards

The interest charged on outstanding balances for store cards can be very high, especially if you compare it to a payday loan or similar. It is good to take a look at this so that you are aware of how much it might be should you decide that you are not going to repay the full balance each month. It can be more expensive than a credit card which works in a similar way. If you miss a minimum payment then it can be even more expensive so you want to ensure that this will never happen.

When you have a store card you may feel that you should shop in that store more often. Perhaps because you do not have to pay for the goods immediately or because you have discounts or down to brand loyalty. This may stop you from comparing prices with other stores and you could end up paying more for items than necessary, even with any discounts that you get. You may also buy more than necessary because you are tempted by the discounts. It can often be the case that we buy something because it seems like a bargain but do not really consider whether it was something that we would have bought anyway or whether we only got it because it was cheap. It can be very easy to end up with things that seem really great but when we get them home, we realise that we really could have managed very well without them.

How many should I have?

Deciding how many store cards to have is a difficult decision. If you want to take advantage of the interest free credit and offers, but are careful to compare prices and only buy what you need, then it need not matter how many you have. However, you do need to be careful that you are in control of your spending. With so many cards it can be difficult to remember how much you spent and where. This means that when the card statements arrive, they could be rather surprising and you may find that you struggle to find the money to repay them. So, you need to make sure that you do keep a note of how much you are spending so that you know that you will have enough money to be able to afford to repay them. You also need to be careful that you do not forget to pay the bills if you have a lot of them. It is wise to set up a direct debit so that you do not forget to repay them.

You need to therefore make sure that you have the right amount of cards for you. If they work well for you and you take advantage of the discounts and offers and interest free credit but repay them in full and stay completely in control of your spending then there is really no limit to how many you should have. However, if you struggle to manage your spending and feel tempted to buy more than you need and do not repay the full balance, then it is probably best to limit yourself. It may even be wise not to have any cards at all.

How to Protect Against Increases in the Prime Rate

If you have any types of loans then the threat of the prime rate increasing can be quite scary. When the prime rate of interest goes up it will often cause lenders to increase their rates of interest on products that they have, both new and existing. This means that if you have loans then they could get more expensive and if you are considering taking out a new loan, it will be dearer than before. There are some ways that you might be able to protect against the rising costs of loans in the circumstance of an increase in the prime rate.

Choose a fixed rate loan

If you have a fixed rate loan then you will be protected from any rate changes. You will always pay the same rate of interest and so a prime rate increase will have no impact on what you pay. If course, if you take on a fixed rate loan after a prime rate increase then the fixed rate could be higher. However, it will protect you from future increases.  You do need to be careful though of how long the fixed rate will last. With some fixed rate loans it will be for the whole term of the loan, but for some loans it will only be for the start of the loan and then it could move onto a variable rate. If this is the case then you may want to look into whether you will be able to move the loan to a fixed rate.

It is wise to be careful with fixed rate loans though. Although it will protect you from rate increases, it will also stop you being able to take advantage of decreases in the prime rate. If you feel that the rate is likely to fall during the course of the loan, you will need to calculate whether you think the fixed rate would seem fair in light of this or whether you think that having a variable rate will be better.

Have savings

If you have some savings to fall back on then this can be useful. It will mean that you can have peace of mind that you have something to help you out should you struggle to make a loan repayment. If you do have quite a lot of money saved then it could be wise to use it to repay the loan and then you will no longer need to worry about the rates at all as you will not have a loan. You do need to be wary of repaying early though as there can be charges for this. Make sure that you are aware of whether there are any and how much they are to see whether it is actually worth repaying the loan early or not. Sometimes the charges are so high that it is cheaper not to repay the loan early.

Try to increase your income

If you can increase your income a bit it will allow you to keep being able to afford the loan even if the rate goes up. If you start earning more as soon as possible, you will be able to put some money aside into a savings account in order to help you out when you need it or use some to repay some of the loan. There are lots of ways that we could earn a little more, such as taking on a few more hours, doing some work form home jobs or selling things that we do not need but if we want a significant increase in income, we may have to change our job or even start our own business. This can need a huge lifestyle change and new commitment and so is not something that should be done lightly.

Spend less

Spending less can always be helpful particularly when you have a loan. It is good to compare prices and buy less items that you do not really need. This will enable you to more easily afford the loan and if the repayments do increase you should still have enough money to be able to afford them. It is not always easy to do this. Sometimes it can feel like we are punishing ourselves because we are going without things that we like. However, it is worth keeping in mind that we need to repay our debt and once we have done, we will be able to treat ourselves again. The debt will be costing us money and the sooner we repay it the cheaper it will be. It might even be worth writing down the goal and putting it somewhere prominent to remind ourselves of why we are being so careful with our spending. Hopefully then you will not feel so bad about reducing what you are buying.