Financial Survival Guide: Credit Cards vs. Savings During Unemployment

Periods of unemployment can be crippling on our finances, especially in the USA where costs just keep on going up and up - we're talking housing, credit card interest, and all those unexpected expenses that seem to come out of nowhere. It's not surprising that with the job market shifting and inflation making everyday spending a challenge for many Americans, households are having to get creative to stay afloat. Two common tools that people turn to when income dries up are savings and credit cards - and getting a handle on how to use each of them is crucial if you want to stay out of financial trouble in the long term.

Recent economic data has shown that credit card interest rates in the States have hit some of the highest levels we've seen in ages, with average APRs now above 20%. This is pretty scary, especially for people who are already struggling to make ends meet thanks to uncertain income. Meanwhile, personal savings rates have been all over the map as households try to reconcile rising costs with limited opportunities for making more cash. It's a real wake-up call to be making informed choices about when to dip into your savings and when to use credit to get by.

For many, their savings account is the first line of defense when they lose their job. Having a well-stocked emergency fund can cover your essential expenses like rent, utilities, groceries and healthcare without breaking the bank - or worse still, adding extra interest charges on top. Financial experts will often tell you to aim for three to six months of living expenses in your savings - but let's be real, many of us fall short of that benchmark. Even so, if you use your savings wisely, you can avoid getting into high-interest debt trouble when you're really vulnerable.

The problem with relying purely on your savings is that sometimes it's not enough. When your cash reserves are running low, using a low-interest or promotional credit card can actually give you a bit more breathing room. For example, if your credit card is offering a 0% intro APR you can use it to spread out your necessary expenses over time without the immediate interest bill. This can be especially helpful when you're struggling to make ends meet or if some unexpected expense pops up.

Credit cards also come with some short-term advantages like rewards programs and better spending tracking - but of course, these perks come with their own set of risks. When you're not careful and you get into high-interest debt it can spiral out of control in no time - especially if you're struggling to make the minimum payments. Throw in late fees, penalty APRs, and all the damage a credit score hit can do, and you can see how a short-term convenience can end up being a long-term financial nightmare.

To make smart choices, its crucial to take a good hard look at whether splurging on credit is actually better for you than keeping your savings intact. First off, you really need to think about what using a credit card will actually cost you, versus just sitting on your cash. This is where taking a close look at interest rates, credit limits and just how long it's going to take you to pay off your debt really becomes handy in figuring out if ploughing on with plastic is even worth bothering with. While you're at it, take a good gander at your regular outgoings & see if there are any areas you can cut back on - because being more frugal can keep your savings out of reach of those credit-hungry fingers and reduce how reliant you are on borrowed cash.

There's a ton of useful data floating around courtesy of financial institutions and government agencies, covering topics like unemployment trends, how much people are in debt and how much people are actually saving. Use this info to get a better grasp on what's going on in the wider economic picture & make choices that are a lot more informed. The Federal Reserve and the U.S. Bureau of Labor Statistics are great places to start looking for the facts and figures, because they're the ones who publish the data that really shows what's going on in the market.

When you lose a job, getting your savings and credit card strategy to work in harmony with each other is just a godsend. Using your savings to cover essentials & keeping your credit reserved for just emergencies or low rate deals is a good way to keep your chin up. Trouble is, once you've got your head in the game, staying on top of your spending and keeping a close eye on it, and doing your very best to steer clear of high interest debt is key. With a bit of careful planning, navigating uncertain financial times becomes a heck of a lot easier & safeguarding your financial future gets a whole lot simpler.