A credit card company’s work is to turn your unused credit into cash so you can borrow money for emergencies and unexpected expenses like home renovation. However, accepting the fast loan might not benefit you financially in the long run. While some understand the reason behind it, many ignore the consequences and go for it anyway.
Credit card loans are fast but do they lower your credit score?
Just a few months ago, Chase and Citi, 2 of the biggest credit card issuers in America have announced to their customers that they will be offering fast credit card loans. However, this offer is only available to eligible cardholders.
While Chase had introduced My Chase loan in late 2019, Citi is offering the amazing yet flexible Citi Flex loan as of 2021.
The new products from the 2 largest credit card issuers seem to be working quite great. In fact, the experts had seen a spike in the market for personal loans since 2019. In the first quarter of the year 2019, the loan marketplace was standing at a whopping $143 billion.
According to authentic research by TransUnion, a credit reporting agency, the market will make an increase by 19.2% year after year.
Yes, credit card loans are cheap, fast, and convenient as compared to cash advances. However, credit report consultation companies suggest that these types of loans can lower your credit scores. Moreover, they are costly. So, if you are opting for it, you would not be able to fix your credit report. Hence, you will end up paying off debts with high-interest rates.
Before you consider getting a fast credit card loan, compare the alternatives and consider the risks involved.
How does a credit card loan work?
Ask the finance experts of the number one credit repair company in the US and they will help you understand all the risks involved regarding your credit score.
Chase and Citi cardholders do not have to request to get a personal loan. Technically, they do not have to apply. Both of the companies are promoting their flexible financing plan. The new fast loan plan is available on their account log-in pages and emails.
The fast credit card loan seems tempting and easy to get because you do not have to apply. However, if you are already in debt, considering a credit card loan is a big mistake.
The amount of money you can borrow depends on the available credit line. Once you agree to the loan terms and choose a loan amount, the bank’s issuer will transfer all the amount to your bank account within 2 days. After that, you will receive a mail to ensure you have received the right amount.
The payback terms of credit card loans
The payback conditions of credit loans range from 1 to 5 years. Furthermore, the monthly payments are automatically deducted from your card’s payment due.
Chase and Citi both had announced that these repayments to them are reported to the credit bureaus as credit card payments. They do not report it to the agencies as a separate loan.
Having different types of credit payments on your credit report can affect your score negatively. You won’t be able to increase your credit score. In fact, it will just be like having a payment and repaying through your credit card.
You can use your credit card consistently but make sure to track your balance every now and then. Besides, ensure that you are always under your credit limit to avoid a hefty fee. By getting a credit card loan, you won’t get any points or miles from Chase or Citi.
The risks and costs of getting a credit card loan
One must only consider getting a loan if he has an emergency. Taking a loan for discretionary purchases will only have you paying more debt with high-interest rates. For instance, if you are planning to go on vacation off the loan money, we would not recommend it.
It might seem like credit card loans are cheap and convenient but the truth is quite the opposite. The annual loan percentage rate ranges from 7.99% to 8.99%. Not only will the company charge you a high-interest rate but it will also increase the credit utilization rate.
What are the alternatives to a credit card loan?
Whenever you have to borrow money, make sure to compare interest rates. Also, consider an option that builds your credit score.
The best option is to go for personal loans, especially if you have a higher loan limit and an excellent credit score.
Moreover, you can also apply for a 0% interest loan if you qualify for an APR card. However, you have to repay before the introductory offer expires.
The only way to maintain your credit score while taking a loan is to pay it off within the time frame.