Lending Club Blog

On P2P Loans, Credit Cards and Keeping a Little Cash Tucked Away

It is in times of desperation that we are the most likely to overspend. When we’re in a jam, we may have no choice but to pay a little more. Many convenience stores charge a premium over chain grocery and drug stores because their owners know that people often would rather pay more to avoid crowds of people and waiting in longer lines. For situations where small amounts of cash are involved, keeping some emergency cash on hand may help to avoid such wastes of money.

I call this the “tuck method” because I always used to keep $20 tucked in the back of my wallet away from my normal money. The method simply involves keeping a small amount of emergency money in a separate location. The “tuck” money can only be used in cases where not using it would cause you to be charged more. This discussion centers around a small transaction, such as buying lunch on a workday when you are out of cash.

A few examples of how you might be charged more are as follows:

    1) If you regularly carry a balance on your credit card and charging a small purchase would subject it to interest and fees
    2) If the only convenient location for withdrawing the necessary cash is an ATM that will charge you a fee
    3) If you’d have to drive to the bank or ATM (and incur the gas usage costs, etc.) for no other reason than to cover the purchase

In any of these cases, the few dollars that you spend on a sandwich, coffee, etc. could end up costing you considerably more.

The second aspect of the tuck method is that you have to replace the money as soon as possible after you use it. That usually means a trip to your bank or fee-free ATM at your earliest convenience, without making a special trip.

The tuck method should help you avoid occasional charges that arise from not having sufficient cash on hand. If you find yourself turning to your tuck money on a more regular basis, then you probably need to change your habits as well. If you are not budgeting for your daily needs correctly, you may want to consider carrying a little more cash to avoid using credit cards. If you don’t pay your credit card balance in full each month, then consolidating your debt with a P2P loan from Lending Club may be a great solution for you. Doing so will help you to pay down your debt more quickly, and it will also put a little extra cash in your wallet each month.

Wednesday, January 9th, 2008 at 10:47 am

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