It may or may not come as a surprise to know that there are a little over 300 million adults in the United States, but 374 million credit card accounts open as of November 2019. One thing is for certain, though: Americans like their plastic. But do we know everything there is to know about owning and using one? Check out these facts on credit cards that may leave you scratching your head.
Interest Is Accruing All Month
Most of us know already that if you pay off your balance in full each month, you won’t pay interest on the money borrowed. But do you know how much interest you’re actually paying if you don’t? It’s all about how interest accrues. Many of us might think we pay interest on the balance we still have at the end of the month. Instead, you’re paying interest based on your average daily balance. This can sometimes make it difficult to figure out how much you actually owe, making it tough to know if you can pay it off. It also means you’ll want to keep as small of a balance on your card throughout the month.
With payday loans, however, you pay one flat fee to borrow money, a percentage of how much you borrowed. This makes it much clearer what you’re paying to borrow the money and helps you be more certain you can pay it off by the repayment date.
Interest Rates Don’t Have A Cap
Let’s say you’ve had a credit card for years. For the most part, you’re a good customer. You make at least minimum payments and some months you may not even carry a balance. Now, let’s say you experience a financial crisis and you miss a couple payments. Not only does this impact your credit score, but this can actually impact your credit card’s interest rate.
See, credit cards don’t have federally regulated limits on how high their interest rates can become. You may have a great rate for the first year you have a card but after that it can increase to any rate. Most credit card companies need to stay competitive, though, and generally tend to increase only when the overall market goes up. On the contrary, payday loans are much more regulated – ensuring customers don’t borrow at the whims of a company.
Annual Fees Are Common
The most common expense of owning a credit card is an annual fee. It’s a yearly cost associated with just having a credit card, regardless if you actually use it. They can range from $25 to $500 a year, and typically pay for the benefits that come with your card, such as rewards. Typically, the more rewards you have, the more expensive your annual fee. Most of us pay the annual fee on our first statement and at every card anniversary date thereafter. Even if you downgrade to a card without benefits, you may still have to pay that annual fee. In fact, 10 percent of credit unions and 45 percent of banks charge this type of fee, regardless of the card.
And a Lot of Other Fees Are Common, Too
There can be a lot of other fees associated with your card. Here’s the breakdown of potential credit card fees:
- Balance Transfer Fee: This fee is charged for moving money between credit cards and is usually a percentage of the dollar amount transferred.
- Exceeding Credit Limit: If you make a charge to your card that puts you over the limit of your credit, you will be charged a fee for the bank or credit card company allowing the charge to go through.
- Late Payment Fee: If you miss a payment, you will get charged a fee. Avoid this by paying every 30 days on or by your due date.
- Cash Advances and Cash-Like Transactions: To request a cash advance from your credit card or make a cash-like transaction could end up costing you a whopping 30 percent of your advance. A cash-like transaction includes purchases on wire transfers, lottery tickets, casino chips, traveler’s checks, and money orders.
- Returned Payment Fee: If you don’t have enough credit on your card and you make a payment, the payment will be blocked and you will be charged a fee – generally around $35.
With payday loans, though, you have a single fee for the cost of borrowing money. And you’ll know exactly how much it is before you even apply for the loan. While non-payment of your payday loan can result in higher loan costs, the fee to borrow relies solely on the amount you are borrowing and does not change no matter the situation.
We Overspend Using Credit Cards
Despite all the costs associated with borrowing money via credit cards, we still use them – a lot. At the end of 2017, we owed a staggering $834 billion as a country; that’s a little over $6,000 per household. And this means that the average American would pay over $1,000 in credit card interest. Despite this, we’ve managed to bring the national delinquency rates down to just under 2.5 percent, an impressive dip from its peak of close to 7 percent back in 2009. Still, paying thousands to borrow money seems excessively high – even if that is paid out over a period of a few years.
While credit cards can be great tools for improving your credit and making small purchases, they can also quickly get consumers in big trouble. Plus, given that it’s required to have a minimum credit score to be approved for unsecured cards, they can be inaccessible for a large portion of the population.
Payday loans and installment loans, on the other hand, are accessible to all. They don’t require perfect credit and not much more than a bank account and income to be approved. They can be less expensive when paid back on time and allow you to borrow as little as $50 or as much as $4,000 depending on where you live. At LendNation, you’re more than a number, whether that’s the number of your credit score or your credit card. We work to build relationships with all of our customers to ensure the best borrowing experience possible. Reach out today to find out just how one of our title loans, installment loans or payday loans might solve your borrowing needs!