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Shaky job? 5 ways to manage your credit

By , CardRatings Contributor

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Credit card tips if you lose your job

Credit cards are never more dangerous than when you're unemployed. Of course, if you're underemployed, they're quite dicey as well.

If you don't dread carrying credit card debt and being unemployed, you can always ask someone who's out of work. It's simple math. When your income is dropping, and your debt is growing, the outcome is never going to be pretty.

So if you suspect you could lose your job, or if you've just been given walking papers, aside from dealing with the shock, scrambling to get your resume updated and wondering what the future holds, it's imperative to think through how you're going to manage your credit cards. Because while they can be your best friend when you're unemployed, they can also be your worst enemy.

Here are some strategies for managing your credit cards if your job is in jeopardy—or beyond:

  1. Pay down debt while you can. Obviously this is easier said than done for some people, but if there's any time to start paying it down, it's now, while you still have an income.

  2. Make sure that your emergency fund is in good shape.

    Having an emergency fund is vital, especially when you're unemployed, as it can help you cope with life's expenses without going into debt or missing bill payments. If you end up facing unemployment, you'll be grateful for funding to fall back on.

  3. Transfer your balance to a low-APR card. If there's ever a time to do this, it's before you lose your job. If you can roll over your money to a credit card that has a zero interest rate for an introductory period, that can give you time to catch your breath and not have to pay as much of a monthly balance. There are 0% APR credit cards with intro offers as long as 18, or even 21 months, which hopefully will give you plenty of time to get back on your feet.

  4. Don't tell your credit card issuer you've lost your job. Huh? Well, not yet, not right away, because you want to think this through. Once you give any hint that your job is in trouble or nonexistent, you might as well kiss your credit card goodbye. That really may be for the best, if you're carrying debt and very little income is going to be coming in.

    But if you expect your career setback to be temporary, and you feel you will be able to manage your credit, the bank won't care as long as you stay current on your payments. That's certainly your judgment call. But bear in mind that if you think it's no fun being in debt and employed, wait until you try being even deeper in debt and unemployed.

  5. Don't use your credit cards to maintain your current lifestyle. It's common sense to any level-headed person, but if you've just lost your job, you might not be level-headed right now. You may be panicking, in denial, or simply trying to cushion your family from having to sacrifice. But your credit cards need to be used for emergencies and necessities, not for eating out and going to the movies.

Only you know your own situation— your income, your job prospects, the interest rate on your card, how much debt you're carrying, your expenses, etc. Without detailed knowledge of your situation, it's impossible for any personal finance expert to say definitively, "Here's what you should do."

Don't panic if your debt begins to overwhelm you. Being in debt isn't a pleasure cruise, and, yes, it's going to hurt seeing your credit score crumble, but your credit cards are pretty insignificant compared with the important things in life like feeding your family and keeping a roof over everyone's head. Better to lose your credit cards than your peace of mind and your health. There's always a possibility to get your credit cards back when times are better.

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