True Cost of Credit Card Purchases
With a credit card or a loan you can make purchases that would otherwise be financially out of reach. But the irresponsible use of credit can carry a high price. Understanding the true cost of credit may make you think twice about making only the minimum payments on your credit card accounts, or taking out that payday loan in the first place. LoanNow helps you understand the true cost of credit by providing informative articles and incentives to encourage responsible handling of credit along with our loans.
When you first make a credit card purchase, it can feel like you’re getting the merchandise or service for FREE. And if you pay your balances in full every month, in a way, you are. But if you don’t, then the true cost of credit begins to demonstrate itself with your first monthly payment. Depending on how long you take to pay off your balance, you could wind up paying much more than the original purchase price.
For instance, if you purchase a $50 pair of jeans with a card with an annual percentage rate (APR) of 22.8 percent and only make the minimum monthly payment, after one year, the actual cost of those jeans would be $62.67, according to figures provided by the University of Minnesota. If you continue to make only minimum monthly payments, after 10 years the cost of those jeans would have jumped to an extravagant $478. 49! As you continue to make only minimum monthly payments, the true cost of credit becomes even higher. After 20 years the true cost of credit for that single $50 purchase would be an eye-popping $4,579.04!
Credit Card Cash Advances
The true cost of credit card cash advances is even higher than for credit card purchases. That’s because credit card companies routinely charge higher APRs for cash advances. To make matters worse, there are usually no grace periods for cash advances. So the added charges begin piling up even faster than for purchases.
While cash advances represent one of the most expensive forms of credit, payday loans have them beat by a mile. The true cost of credit from a payday lender could be higher than you ever imagined. That’s because payday loans routinely carry triple-digit or even quadruple-digit APRs coupled with unrealistically short repayment periods.
This combination results in four out of five payday loans being rolled over at least once, according to the Consumer Finance Protection Bureau. Each rollover results in an entirely new loan with a fresh set of fees and interest charges, which quickly results in a modest loan of a few hundred dollars spiraling into a debt of four figures.
The LoanNow Difference
At LoanNow, we understand that one of the major contributing factors to money problems is a lack of knowledge about the true cost of credit. That’s why we provide credit education and incentives to encourage our borrowers to handle credit responsibly. We also say no to rollovers and hidden fees that add so much to the cost of payday loans. Why not experience the LoanNow difference today!