Do you have the right credit card or loan for your financial situation?
Do you have the right credit card or loan for your financial situation?

Many people know the importance of establishing and accumulating credit and using it wisely, so they have good credit.

While there are plenty of tips and resources out there to learn how to manage credit, reduce debt, and increase scores, the types of credit available to them that are best suited to their needs can sometimes be overlooked. .

Credit management isn’t just about choosing the right rewards credit card, after all. In fact, a recent WSFS Banking Money Trends A survey found that nearly seven in 10 (69%) Greater Philadelphia and Delaware area respondents who used a line of credit or personal loan in the past 12 months did so for a major purchase or to do something important to them, like buying a car, buying or renovating a house, or going on vacation.

In a few simple steps, you can identify your credit needs and the products that are best for you in the short and long term.

Here’s how to start.

Evaluate how you use credit cards

This step is crucial. If you already have a credit card with terms and rewards you like, like cash back on purchases, and can afford to pay it back without having to pay a monthly balance, the best thing to do is maybe -be to stick to it.

If you use your credit card to pay monthly bills, like utilities, make sure you don’t get hit with a surcharge by the payee, which could void any rewards you earn.

Limited - Image Currency Trends in WSFS Article

By continuing to use and pay off your credit card, you will also continue to increase your credit score, which will help you get better rates on other loans when you need them, such as a personal loan or home equity line. credit, mortgage or equity in your home. line of credit (HELOC).

However, if you find yourself falling behind, take a close look at your spending first and see where you can cut your spending. Then start paying off the revolving credit card debt, starting with the card that has the highest interest rate.

Look for flexibility

If you are considering a longer-term need, such as an unexpected large expense or to consolidate debt, or even a large planned purchase such as paying for a wedding, personal loan or line of credit maybe an adjustment.

Personal loans
are fixed for a fixed amount and repaid over a fixed period of time at a fixed interest rate, usually lower than that of a credit card, so there are no surprises for the borrower during the term of the loan. These fixed terms allow you to manage your debt with assured timelines and costs to repay what you have borrowed.

During this time, a personal line of credit
gives you the ability to borrow what you need when you need it, up to a fixed amount pre-determined by your lender. Similar to a credit card, you only pay interest on what you’ve borrowed if it’s not paid back in full.

If you have periods of fluctuating income or bills and need extra funds to work for a short time, a personal line of credit may be a good option. The Money Trends survey found that 65% of regional respondents have used a personal loan or line of credit in the past 12 months to pay bills, indicating the flexibility these credit options offer borrowers.

Other Borrowing Options

The Money Trends survey found that more than a quarter (26%) of respondents had borrowed money from family or friends in the past year, while 20% had tried using “buy now, pay later” (BNPL) options.

BNPL is like using a credit card, with a few key differences.

First, the BNPL requires consumers to pay for a purchase in fixed installments, whereas a credit card is renewable and requires only the minimum payment. While it’s recommended to pay more than the minimum on any credit card, if you’re having a tight cash month, paying the minimum won’t hurt your credit score. Unfortunately, if you miss a BPNL payment, the lender may report you to the credit bureaus, which will negatively impact your score. Moreover, BNPL does not help to construct your credit score.

BNPL options can also charge high interest rates or fees if you miss a payment, so make sure you understand the terms of your purchase. Also keep in mind that it can be easy to lose track of how many BNPL purchases you have made, causing you to accidentally overload your finances, making planning and budgeting difficult.

Finally, not all retailers accept BNPL as an alternative form of payment, and not all BPNL policies are the same regarding down payment, returns and embedded fees.

When assessing your borrowing needs, it is important to consider the repayment terms and interest rates associated with the different types of credit products available. No matter what type of credit or loan you use, have a contingency plan in place to make sure you can repay what you borrow.

Speak to your local banker to determine which credit options best suit your personal needs.

About the Author – Shari Kruzinski

Shari Kruzinsky is Executive Vice President and Chief Client Officer at WSFS Bank. His career spans over 30 years in the banking industry, including 31 years with WSFS. In her current role, Shari leads the Bank’s Client division, including client experience and enterprise-wide client initiatives. She also oversees the retail offices, contact center and retail operations of the Bank.

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