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General

Credit Card vs Debit Card which is best?

Many people have both a credit card and a debit card which they use for shopping. It can be hard at times, knowing which one is the best to use and so it is worth understanding a bit more about them before you choose.

A debit card payments moves the money form your bank account to that of the place you are buying from quickly. It can happen almost straight away or take a few days, depending on the bank and place you buy from. It works very much like a cheque but is faster. A credit card is very different. When you pay for things on this card you will not have to pay for them until you get your monthly bill. This means that you get a period of time when you have the items and have not paid for them, so it is almost like having interest free credit. When you get your bill you can choose whether to pay it all off or whether to pay a minimum amount and leave the rest to pay off later.

Many people will choose a credit card because they do not have the money to pay for the item immediately. They take advantage of the fact that they can delay paying for it all and get what they need without having to wait until they have saved up the money for it. This can be really useful if you are buying things that you really need, such as food or paying bills as long as you pay it back as soon as you can. It will give you a way of being able to pay that bit extra without having to worry about not eating or being cut off. However, if you are buying things that are not necessities then it is worth considering whether you really want to buy them this way. You will end up paying a lot more for them as you will have to pay interest on the money that you have borrowed in order to pay for them. The longer you delay in paying it back, the more expensive the items will effectively be. It is easy to forget about this when you make the purchase, but you need to think hard about it.

If you are buying online, then you may find that it is safer to use a credit card. When you use a credit card you have insurance and so if the item you buy never arrives or has a problem with it, you can make a claim through the credit card provider to get your money back if you cannot negotiate with the seller. This adds protection to your online purchase and can be really worthwhile and some people always choose to use credit cards online for this reason. This protection also applies to offline sales and so for big purchases it can be worthwhile. However, make sure that you look into what cover your specific card gives you, before you rely on it too much.

It is worth taking a look at the charges for using cards too. There are some companies which will charge a fee for using a credit card, but there are not normally fees for using a debit card, although there may be some exceptions to this. Small and independent businesses may charge if you use a credit card for values under a certain amount or they may not allow you to use one for low value purchases at all. Some larger companies may charge a surcharge or fee for using a credit card as well. Usually they will warn you, but always ask if you are unsure.

If you are worried about the temptation to overspend with either of these cards then it may be best not to use either of them. However, a credit card may be more of a temptation for many as the money does not have to be paid back. With a debit card the money will come out of your bank account and so if there is no money there, the payment will not go through. With a credit card, you will have a credit limit and be able to use money up until that limit. This could mean that you will be tempted to spend a lot of money on the card and this will allow you to be able to spend more than you can afford to pay back. It is always wise to pay off the full balance outstanding on the card each month, when it is due in order to avoid being charged interest. However, if you spend more than you can afford to repay, you will not be able to afford to do this. If you think you will be tempted to overspend then it may be wise never to use the card in the first place.

Students

Is a Student Loan Worth Getting?

Student loans are very common in some countries, but in others, such as the UK, they are a fairly new thing. In either case, whether you should get a loan or not, is something which should be thought about really hard. Some people feel that being a student is well worth it, even if they have to pay for the privilege, whereas there are others that do not agree. Obviously it is all down to personal preference, but it is worth thinking hard about before you make that decision.

Firstly consider the reasons why you are doing the course. Consider whether those are reasons that are worth having to be in debt for. If you need the degree for the job that you want, then you may think that it is necessary to do it. Find out though whether it is possible to get that job without a degree in any other way and also whether there are any degree apprenticeships available which could help you to not need a loan when you are doing a degree. It may take longer that way but you will have paid work and a free course, which is very much more attractive than a loan for those concerned about being in debt although it will take a lot of hard work.

Of course, you may be doing a degree because you are interested in a particular subject and would like to study it further. Although this is exciting, it can be a very expensive way to learn more about a subject. With the Internet, books and magazines, you could probably teach yourself for a much lower cost and work at the same time.
Some people like the prestige of being able to say that they have a degree. Although this is understandable, there are more and more people getting degrees these days so they are not held in such high regard as they used to be. It is also a very expensive way to find something to feel good about. It could be better to see if there is something cheaper that you can do which will still give you the same feeling but without the cost.

Many people feel that it is the whole student lifestyle and experience that they want to do it for. It is also worth considering exactly what you mean by that and what you think it will give you. Moving out of home is something you could do anyway and find a job in order to finance it. You will still have the experience of being away from the family and could choose to move as far away as you want but if you have a job, you will be able to do it without getting a loan. It might be hanging out with peers, the intellectual conversation and studying together that you relish the thought of, but they rarely happen and you can do this with work colleagues as well.

One great thing about being a student is the lack of having a job. You can stay in education for another three years, normally without having to attend formally for more than a few hours a day. This is great fun and means that you can delay the 9-5 rat run for longer. However, once you do start work, you will be paying back your loan and this will mean that you will effectively be being paid less. This will happen for a long time and this could be a time when you want to save up for a deposit on a home, make mortgage repayments or even start a family and you may wish that you had more money.

Of course, you could work and earn the money for the cost of the degree and then pay for it, rather than borrowing the money. When loans first came out in the UK, it was felt it was better to borrow the money as the rates were low and you would probably not have to repay it all so you would gain from getting a loan. However, in the UK the rules on student loans have changed and they may again, so there is less certainty as to whether it will be cheaper to borrow the money than to pay it with savings now. This will also be different in other countries as well.

So it is worth thinking hard about whether you should get a loan or not. It could be better to earn the money and then pay for the course rather than borrowing the money. It could be worth looking for an apprenticeship where the course is paid for you or it could be better to forget it altogether and get a job instead. Of course, there will be lots of reasons why it could benefit you to borrow as you may get a job which has a much higher salary than you could get if you did not get the qualification. It is a big decision and one that you should spend a lot of time considering before you make it.

Investments

Is Buying a Home an Investment or a Debt?

Buying a home is a big step for anyone. Most people will need to take on a mortgage to buy a home and this makes it an even bigger step as they will be likely to be taking on a 25 year debt. This can be a scary and daunting prospect and is certainly something which needs to be thought about.

Some people consider a home to be a really good investment. They feel that you will eventually own it, after paying the mortgage back over 25 years and then you will have a property that you will be able to live in rent free. This is certainly a great prospect, particularly if your income is likely to drop in retirement, you will not have to worry about affording the rent as well as everything else. House prices also tend to go up over time. This means that what you have bought should go up in value and that is why many consider it to be a good investment. Investments do take time to go up in value though, this is unlikely to happen in the short term, although it can do in a few rare circumstances. Some homes will double in price in ten years and some may do even better and so you will find that the money that you pay for it will be very much less than the value when you have finished paying off the mortgage.

Of course, there are risks with buying a home, like there are with all investments, but if you have a mortgage there are higher risks. There will be a risk that the property will not increase in value or in fact may even decrease. The risk is small as historically property will increase in value over the long term. However, certain locations may become less desirable and this could mean the value goes down. Therefore there is a risk and it is not always easy to know whether this will happen or not. There are lots of reasons for an area becoming less desirable, such as crime, type of house, risk of flood or subsidence and it is not usually easy to predict these things. People who bought river side properties twenty years ago had no idea they would have a risk of flooding in the future, for example.

As well as the risk of the change in house price, there is a risk with borrowing money as well. The repayments need to be made every month or else there is a risk that the lender can reclaim the property. They are likely to give you some chances to miss repayments, but they will want to make sure that they get their money back and if they feel that there is a risk that they won’t then they will eventually repossess the house. This does not happen often, but there is a risk and then you will have paid in all that money for nothing, although if you had not been paying it, you will have had to pay rent instead, which in many cases is dearer.

A house is an odd sort of investment though, because you will always want somewhere to live. If it is the family home that you are living in, that is being referred to then the owner will not normally be able to take advantage of the investment. In many cases they will buy a home, pay off the mortgage and live in it until they die and so the value contained within it will go to whoever inherits form them, rather than them taking advantage of it. However, some people do things a bit differently. They will climb the property ladder, by moving to larger houses when they can afford it. Taking advantage of the increase in value of their home as well as increases in salary they will borrow more money. Then when they retire they can move to a smaller and cheaper home and use the difference in cost to live off. However, retirement homes can be a lot more expensive than regular homes and so it may be that the whole value of the home is needed to buy a smaller place, with added retirement facilities.

I suppose the conclusion to the question as to whether owning a home is an investment or a debt will depend. If you are using a mortgage to pay for it then it is both until the mortgage is paid off and then it becomes an investment. In both circumstances there is some risk involved as you could find yourself in the situation where you cannot pay back the loan and you may also find that the property decreases in value. However, in most cases the worth of the investment outweighs the risk and this is why many people do decide to buy homes with a mortgage.