4 March 2014
Short Term Loans Versus Credit Cards
Short-term loans are getting heavily regulated with the amounts they can charge, fee limits, and other restrictions such as how many loans a person can have at one time, and in some states all at ban of short-term loans.
Credit card companies aren't as regulated, can charge what ever interest and fees they want, and there is no limit to what fee amounts they can charge. This means that a person with say a $50 balance, ends up paying late because of some unforeseen event. They are then charged a $40 late fee, which is about 80% interest, and they are only suggested to pay the minimum. Now that person pays the minimum amount each month of $10 and has an interest rate of 10%. They would wind up paying well above $100 for an original balance of only $50. Whereas they could have taken out a short-term loan for $100 and only had to pay back in some cases the balance plus a $15 fee.
The fact is that credit card industry is much more predatory than the short-term loan industry. Credit card companies are out looking for new members, tacking on fees like annual memberships, over-the-limit, paying late, and a slew of other reason, as well as no limit on the amount of interest they can charge. For example, I got a letter in the main a few weeks ago telling me that my credit card policies were changing, and that my interest rate was going up. I've been paying on time, and have a good account, but yet they are able to increase my interest rate without giving me a chance to try to lower it.
For years I've been watching the credit card industry get away with things that I would call predatory lending, yet they are still allowed to do the same things today without any consequences, while the short-term loan industry is getting hit almost daily with new laws and regulations. I personally would like to call for tougher regulations on the credit card industry along with the short-term loan industry. It's not that I don't think the regulations are good, but on the contrary, I would just like to see it expanded to protect consumers and states from credit cards as well. To find out more about payday loan laws in your area you can visit your state's authority on financing.