Critique my plan.....Credit cards

My husband’s boss told him very unexpectedly to apply for unemployment as the store was going to shut down soon. My husband being the resourceful git he is, went out and got another job through a friend. One that pays two dollars more an hour.

Problem: We’re going from a weekly pay schedule to a bi-weekly. And he came in in the middle of a pay period. And we live basically paycheck to paycheck until I finish school. So our phone bill and power bill are way way behind now, and our first check was so small it won’t cover our rent, and we don’t get paid again until three days after rent is due. We could wait until we got the next check and work something out with our landlord (we’ve never been late in the three years we’ve lived here.) but then our phone and power would have to slide AGAIN. And that’s not even counting that we need gas and to pay our babysitter. So, I was thinking of getting a low interest low limit credit card and putting those past due bills on it. Unless we qualify for some kind of one time emergency rent assistance, I don’t see that we have any other choice. We have extra money coming in, and maybe we can pay it off in the next four months or so. (We’re talking about 800 dollars worth of bills here.)

So what am I not thinking of? What do I have wrong? Are there other options I haven’t thought about? Does anyone know of any good websites where I could peruse my credit card options and get more information? Neither of us have had a card before.

Hit up mom and dad? Sell your car? Invent a genius atomic death ray and sell the patent for millions?

All viable options.

Congrats on the new/better job!

How about a bank or credit union loan, with a car as security?

Also, if your husband’s new employer offers payroll deduction for bank loans, a bank or credit union might be willing to take you on as new customers. At the last place I worked, almost everyone banked with a local credit union. They were able to set up automatic deductions for car loans, home equity loans, as well as deductions for savings. The credit union was very generous because they were guaranteed to be paid, unless the debtor was fired, and firings were rare.

I think a credit card should be a last resort. It’d be too tempting to use it for nonessentials. And these days, it might be more difficult to get a card, if you’ve never had one.

Maybe the power company and the phone company would accept partial payment.

My husband’s current bank doesn’t want to loan him anything. He has a small loan he’s paying off now.

I’ll have Andrew ask about the second option.

What if I used it to pay those bills, then cut it up/froze it?

If you’ve got the willpower to cancel it again afterwards, I’d use it and then pay it off and get rid of it. Don’t do what I did, which is use it to pay your rent and unexpected healthcare costs, and then leave a balance hanging around (not that I had much choice, but still…) - if you have a balance on a card, it’s psychologically much easier to add to it, than it is to start spending on a paid-off card.

I’m not in the US, so take the above with a pinch of salt, since the system might not work the same way for you. But I can’t see a major problem with it - IMHO, that’s what credit cards are made for, short term loans that you know you’re going to be able to pay off at a point in the near future.

Otherwise, will your husband’s new employer give him a salary advance? My old company used to do this for new employees, maybe yours might, too? It means you get paid less at the normal pay-day, but it doesn’t leave the big gap that is your immediate problem

I’d cut out the non-essential bills till I got caught up.
Of course you need rent, gas, electric but you could drop phone, cable/sat, internet, etc. for a few months.

Usually what I do when we hit a spot like that is take X amount out of savings and at the same time set up an automatic debit to put the money back on the next payday so that by the time I see that my paycheck has hit my account it has already put that money back. If you did something similar and set up an automatic payment for the card due on your payday you could probably handle it but if you can’t do it all at once and then cut up the card it may not be a good idea.

You are missing that with neither of you having had a credit card before, a low interest card will not be available. Expect to pay 20% + and more likely around %30. You are right that your card will have a low limit, but it may not even be enough to cover $800 worth of expenses. Starting limits of $500 or less is not uncommon, especially with low household income.

That is of course if you can get a card at all.

I’ve used credit cards in a real pinch. In my case, I was younger and had crappy insurance, then got hit with thousands of dollars in medical bills unexpectedly (brain tumor scare). I had not enough in savings to cover it, and the hospital wouldn’t accept a payment plan of more than 2 monthly installments. It was that or hit up relatives. The interest, though, was so bad that I ended up asking my mom for a loan anyway (so I could stop paying $80+ a month in interest); I honestly wish I had just done this at the start. I paid it off early with the money I saved on interest.

However, it sounds like you’re over the edge right now, already. You’re letting utilities slide? The credit card payment is going to end up sliding, too, and you’ll be tempted to keep using it… then the usurious interest will start to really, really hurt. And you’ll have to keep adding to the debt, because you’ll need to start covering the interest. It’s a cycle.

If you feel you have no other choice, then I guess, go for it – but cut up the card after using it for what you planned. But if it were me, I’d make sure it was really, really necessary. During the lean times, I’ve done a lot of things to make sure I wasn’t living paycheck to paycheck, since doing so always ends up costing more in the end from penalties, fees, and interest:

  • Finding freelance work of all different kinds. This can be hard to get started but honestly is easier than living on the cheap indefinitely. People make side money from all kinds of stuff (e.g. through Craigslist) - babysitting, walking dogs, yardwork, day labor, whatever.
  • Selling stuff such as on eBay, Craigslist, and the odd garage sale. Pretty much everyone has stuff they don’t need.
  • Really cutting expenses on anything fun, and stuff like clothes that you can generally wait on.
  • Reducing gas use as much as possible.
  • Cutting grocery costs a huge amount by cooking a lot at home and buying stuff that was super cheap (beans, rice, shopping at Aldi or Big Lots or other really cheap places).

In the end, while it sucked to make a lot of sacrifices earlier, I’m glad I did. Because of that, I was able to buy a house and stop throwing money away on rent; I could finally have pets, because I wasn’t constantly moving to avoid huge rent hikes… and so on and so forth. I’m doing fine now, my car’s paid off, and I’m making extra mortgage payments. I’ve known a lot of other people that make a lot more than me, but live poorer lifestyles because of their debt.

Now, don’t get me wrong. I play the credit card game - I filter all available expenses through credit cards to reap rewards. But I do this because I’m absolutely, positively sure I’m going to pay it off every month (I’ve set it up automatically out of my checking account, which is interest-bearing, and which I use instead of savings), and so for me, there’s no real risk. Still, I’d never recommend a credit card to someone who’s not planning to pay it off in full every month; the costs are just way too high.

My husband and I used our credit in a similar situation; we had just bought a house, and we both lost our jobs within a month of moving into the new house. We paid bills and mortgage with our line of credit for a month or so; that was better than losing the house. We are financially responsible people, though, and had the discipline to not make a bad situation worse, and paid off the debt as soon as possible. I always try to keep our expenses within our earnings, but I’ll occasionally relax that enough to put something on credit (if we find something on limited sale, for example), then pay it off ASAP.

Having a bit of credit available to you is not inherently a bad thing; you just have to be responsible with it.

The interest will probably be egregious if you can get the card at all. The thing is disconnect and reconnect fees with interest on the past due bills will be expensive. You may also end up on the must have a large deposit list to reconnect. This seams to tip in favor of a credit card if you can’t get a loan from some place.

Ask the landlord if you can pay half the rent with first paycheck, and half with second. I’ve had to do this a few times - they are always supportive of new jobs!

I think the big failing on your plan is that it’s contingent upon one thing: obtaining a credit card that meets your criteria in enough time to use it. I think that if you don’t have it in your possession right now, it may be too late. But I don’t know your timetable.

I have 12 days to figure out something about the rent. I’d really really really rather not get a card at all. (We are only 3,000 in debt. We hate debt.) My MIL swears that we’ll figure something else out, since this is only a temporary situation.

This is what credit cards are for. If getting a credit card will let you avoid late fees, do it! If you don’t carry a balance, they don’t even charge you interest. Even so, a month of interest will likely be much less than the late fees you’re looking at, and you’ll save your credit score.

ETA: apply for a card at your bank, if that’s what you decide to do. It’ll go through faster than traditional mail will.

Whats the late fee on the rent, maybe its better to pay a one shot late fee rather than go through all the hassle of cards and such.

Talking to landlord sounds like a good option.

If you are going to be late or miss a bill payment altogether, I strongly encourage you to call the company / utility first. I know this can be embarrassing, but it will almost always result in better treatment. For example, say you owe $100 on your power bill. Call them a week before it is due, say you cannot make the full payment this month but can you work something out? Most likely you could get away with paying $20, with the rest rolled forward to your next bill. You may even be able to avoid late fees or penalties, although they will likely charge you 1-2% per month interest (likely no worse than a credit card).

Companies realize that people often have cash flow problems, and are often surprisingly accommodating to customers who keep them informed and make good faith efforts to pay something. This is especially true of utilities, who often have very tight restrictions on their ability to disconnect your service. If you call after not paying for a couple months, it will be a different story, though.

Best of luck with school. Although your situation is hard today, future torie will thank you. :slight_smile:

Exactly what Iridescent Orb said. Call the companies that you owe and explain the situation to them. Most of them will be glad to make arrangements with you. They would much prefer you contact them and let them know what is going on than you just making a partial or no payment with no explanation at all.

I second this, and especially add to include your landlord on the list to talk to. If you’ve been good tenants so far, they’ll probably be happy to work something out.

I have zero experience with them and I hear the interest rates are crazy, but many, many people find payday loans a viable alternative when they’re caught short.