Why should you avoid payday loans and cash advances?

Credit can be a dicey situation when you don’t know how to manage it properly. There are so many fees, interest payments, and more. It can become overwhelming and sometimes you will worry that you will fall behind. Two things you should do to keep from falling greatly behind with your credit and debt, is to take out a pay day loan or use cash advances.

Cash advances are when you take money out of your credit card at the debit machine. This gives you cold hard cash from your credit card and it can seem very appealing to do. However, the truth is that it is one of the worst ways to use money on your credit card. Cash advances have interest rates of as much as 25 percent to 40 percent. That means if you take our $200 in a cash advance, you end up paying between $50 and $80 extra in interest as a result. You should avoid cash advances at all costs. Paying that much interest will only set you back. On top of the interest rates, you can pay as much as $10 to $20 in fees for using the cash advance. Try and use online banking transfers instead of cash advances. Under no circumstances should you use cash advances on your credit card.

Pay day loans seem tempting. If you don’t have the money to pay your bill, you just write a post dated check to a pay day loan company and they give you the money you need at that time. After two weeks, the company cashes the post dated check and everything is square. Sadly, it is not that easy. Pay day loan companies will often take large amounts of interest on your loan. This interest can be as much as 40 percent per two weeks. On a $200 loan, you end up paying $280. There are also other fees attached to it. If by chance you end up bouncing the check because you still don’t have the money, then you have to pay an NSF charge. On top of that charge, there are charges with the pay day loan company, and your interest rate will increase as well. If it takes you an extra two weeks to pay back that $200, you could still owe more than that in fees and interest payments. This is why pay day loans are one of the worst things you can do. It is also why they are illegal in 12 states and severely regulated in 37 states.

Cash advances and pay day loans seem very tempting to use, but they are like a trap door to debt. The interest payments alone can leave you with your head just above water as you continue to take out loans to pay back other loans. Before you know it, your entire house of cards has fallen and you are struggling more than ever with debt. At this point, your only option may be bankruptcy.

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