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Credit cards are the easiest financial solution to many problems – but not always the best one. Still, many people rely on them anyway because of their convenience, and also because they don’t know of the other finance solutions available to them. What I hope to do is to give you reason to consider other options to a financial matter, without getting out the plastic.
Well, credit cards are a very expensive means of using credit, for one. Despite their convenience, they can really hurt you in the pocket. Did you know that some credit cards are charging you over 35% interest rates? Here are some facts that might astonish you…
- Highest historical credit card interest rate: It was 79.9% on the old First Premier Bank Credit Card (no longer available. It was for people with bad credit.)
- Highest current credit card interest rate: 36% on the First Premier Bank Credit Card. The card is unsecured and for bad credit. It has an annual fee of $75 – $125 for the first year and $45 – $49 after. Plus, there’s a $95 one-time processing fee.
- High current credit card interest rate: 29.99% on the Total Visa. The card is for bad credit. It has an annual fee of $75 for the first year and $48 after. It has an $89 one-time processing fee. There is also 29.99% on the First Access Visa. This card is for bad credit. It has an annual fee of $75 for the first year and $48 after. It has an $89 one-time processing fee.
Look at these Finance Solutions instead
Secured Personal Loan
A secured loan is a loan that is backed, or secured, by collateral—these are financial assets you own. These can be your home or your car—this asset would be used to cover the payment to your lender if you go into arrears and fail to settle your loan.
Secured loans tend to be cheap, as far as finance goes, because the risk is low to your lender. If you don’t pay, then they get their money back by selling the collateral. This makes it higher risk to you. They can also be time-consuming to register because of the time it takes to deal with the paperwork.
Unsecured Personal Loan
An unsecured loan is a type of loan that is supported only by your creditworthiness. No collateral is required to secure the loan, which means that the risk to you is less than a secured loan, and the risk is higher to the lender. This also means they can be more expensive to you. If you manage your finances well, always make your loan payments, but have little in terms of collateral, then this option might be suitable for you.
An overdraft is a line of credit from your bank or lender that is granted to you when your account has no funds in it. Many checking bank accounts have this facility as standard. They’re very convenient because they allow to continue withdrawing money or paying for services without disruption (and nasty letters!) Depending on your bank and the amount you have gone overdrawn, the cost of an overdraft can be free, or in some cases quite expensive – especially if the overdraft was not agreed upfront. As an option, an overdraft might work for you but I strongly advise that you check the detail first.
Any questions on finance options? Please leave a comment below.