Payday Loans vs. Credit Cards
Why would anyone choose a payday loan to cover occasional cash shortfalls when credit cards are so readily available? Credit cards might seem like the safe and easy option for payday loans when you need it, but a payday loan may prove to be a better solution for many people in the long run.
How can a payday loan be considered a better short-term credit option? This might sound like an unusual claim when everyone seems to have a credit card. Credit cards are a normal, everyday part of our lives and a big force behind our credit-driven nation. Our daily routines revolve around the use of credit. The welfare of our jobs, cars, homes and families all rely on our using credit.
There are plenty of horror stories about credit cards. But if credit cards are such an important part of our economy, how can they be all bad? And in truth, they aren't. As with any form of credit, including payday loans, credit cards can work well when used responsibly. For example, when used properly and paid on time, credit cards can help you build an excellent credit rating. Many credit cards offer rewards for good spending and repayment, including plane tickets, vacations, shopping sprees, and cash refunds to name a few. Some even build points that can be used to redeem just about anything.
Credit cards now offer endless arrays of colors, designs and customizable schemes. Credit cards can make us feel "grown up". Unfortunately, that feeling comes with many responsibilities and choices that can heavily affect your financial health for the rest of your life.
The first thing to consider with a credit card is its applicable interest rate. Credit cards allow you to borrow payday loans for purchases you want to make today. You are then, in turn, charged a percentage of your balance, called APR, or annual percentage rate. These rates can rise and fall without warning, and the higher these rates get, the more interest you pay and the harder it becomes to pay off your balance. This interest begins to be calculated as soon as the credit card becomes active and continues to be charged until you no longer have a balance.
Fees are probably one of the biggest credit card pitfalls, and they come in all sizes for all reasons. Unlike the fees charged upfront for a payday loan, credit cards can often charge fees you don't initially see. Some fees are clearly explained, but others are submerged in the fine print. These kinds of fees are often referred to as "hidden fees" and they can really add up fast. Hidden fees can include hefty start-up fees as well as processing fees, and both can reach $50 or more. You can be charged for having a high balance, for having no balance, for having a card that builds reward points, or for taking out a credit card payday loan. You can even be charged a fee for requesting a paper copy of your bill. These hidden fees can show up everywhere; it's all at the discretion of your credit provider. This nickel-and-diming can make budgeting difficult and repayment almost impossible. Sometimes at signup you will even be warned in advance to expect a hefty first bill so you won't be surprised. But the only way to know for sure why you're being charged is to thoroughly read and understand the fine print.
Late fees are by far the most dangerous of hidden fees. Late fees are hefty (they can be upwards of $40 depending on your provider) and can harshly impact your monthly bill. Some companies will charge you a late fee even if you pay the same day your payment is due. Some charge for check, payment by phone, or payment online. Some will even place a late charge on the entire balance of the card following the month of tardiness, making your bills gradually get larger and larger. Unfortunately, once you're late in the company's eyes, you are obligated to any fees or punishments to your account they see fit.
More recently, credit cards have become the currency of choice for online shopping. While this adds to the speed and convenience of the experience, if you're not careful, your account and other personal information can be collected and exploited by identity thieves. Check out our resources section for more information on how to keep yourself safe online.
Credit cards require strict budgeting, and even stricter control of spending. If you don't have the cash, or can't afford to pay it back consistently and on-time, don't spend it. Credit cards can give the illusion of an endless amount of cash. This is unfortunately why they are a major source of debt to most everyone who has one. Because credit cards are so easy to get, it's very easy to fall into a cycle of debt. Once late fees and high interest begin to accrue, paying off this debt becomes more and more difficult, which may lead to ultimately defaulting on your payments, or even bankruptcy.
If you're in need of extra cash and are considering a credit card, consider a payday loan from Check 'n Go instead. A payday loan has no hidden fees, no startup fees, and a one-time payment for the period you're borrowing. By doing some simple budgeting and planning, you'll know to only borrow responsibly for short-term cash flow problems. Paying your payday loan off on time is also a great, manageable way to build your credit, and positively impact your financial health for years to come.