Can You Negotiate With Your Creditors?


Yes, you can negotiate with your creditors, but make sure you do your homework first.

We’ve all got bills we have to pay. And sometimes we don’t have all the money we need to pay them. So what’s the solution?

Well, if you have good credit, you can get a personal loan at reasonable rates. If you don’t have good credit, you might consider a bad credit loan or a no credit check loan, but those tend to have high interest rates and, if they’re a payday loan, very short payment terms.

And besides, taking out another loan or a credit card cash advance to pay your bills won’t really solve your problem. It’ll just leave you with another bill you aren’t sure how to pay.

Is it worth trying to negotiate with your creditors? And if so, what would be the best way to do so? Read on to find out!

The first step is admitting you have a problem.

Wouldn’t it be nice if your creditors just … stopped calling about your missing payments? Maybe if you just ignore them for long enough, they’ll forget you exist. Most creditors are goldfish, right?

As Jonas Sickler, marketing director for (@repmgmt_com), told us: “Burying your head in the sand will make it worse, not better.”

And why is that? Because when your creditors stop calling, it isn’t because they’ve forgotten about your debt. It’s because they’ve turned it over to a debt collector who will start calling you instead.

So did anything change? Yep. Your credit did, and not in a good way.

“One of the most important debts to negotiate is collections,” says Sickler. “Having debt in collections can do significant damage to your financial reputation—affecting everything from your ability to get a car to a business loan, so it’s essential to resolve these issues rather than ignore them. Fortunately, you do have some bargaining power at your disposal.”

So how do you deal with the people to whom you owe money, collections or otherwise?

(Related reading: What Debt Collectors Can and Can’t Do.)

What’s realistic for you?

Once you’ve accepted that you’re going to have to deal with these debts, it’s time to figure out what your “dealing with it” budget looks like.

Here’s how author, financial educator, and friend of the Financial Sense Blog Gerri Detweiler (@GerriDetweiler) put it for us:

“Know what you can afford. This may sound obvious, but many people don’t really go into a discussion with a creditor understanding how much they can afford to pay on each debt. Before you make that call, you need to carefully review your spending to figure out the most you can afford to pay and still be able to pay essential bills like rent, utilities, or gas for your car.”

Once you have a realistic sense of your financial situation, it’s negotiation time.

Know what to expect.

Now that you know what your own situation is, it’s time to learn your creditor’s situation too.

First of all, know what they aren’t going to offer you. “Understand how it works,” advised Detweiler. “If you are able to afford your minimum payment each month then it is unlikely your creditor will reduce your payment as long as you are continuing to pay that amount. In other words, they aren’t going to let you pay less than you owe unless there is a clear risk that you are going to not pay them at all.”

Detweiler also explained that, even if the person you’re talking to wants to help you, they may be limited in their ability to do so: “Creditors tend to be very policy-driven. In other words, they will have their own internal guidelines that cover when and how they can reduce interest rates or payments in hardship situations. Your main goal, therefore, will be to get them to explain the options available to you.”

So you know what your situation is. You know what they can potentially offer you. Now how can you increase your odds of getting that thing or thing?

Use your leverage.

Creditors are, for the most part, businesspeople, and that means they don’t want to lose money. They’d rather get some of the money you owe them than none, especially if it means they don’t have to spend money on lawyers.

“Creditors want to collect as much as possible,” advised Detweiler. “You’ll have the most leverage if you are falling behind on payments. However, that will damage your credit scores. It’s a trade-off.

“If you are not already falling behind but you think it’s likely in the future, you may want to talk with a credit counseling agency. If you are already falling behind on payments, then you may want to look into debt settlement or even bankruptcy.

“You may have a lot more leverage with a debt collector. Debt collectors often negotiate debts and may be willing to accept less than the full balance. The older the debt, the easier it is to negotiate a smaller payment because they know the likelihood of collecting becomes slimmer as the debt becomes older. Just make sure you first check the statute of limitations on the debt. Agreeing to pay the debt or making a payment of the debt of any size may restart the statute of limitations, allowing them to sue you to collect.”

And whatever agreement you are able to reach, there’s something you’ll want to be certain to do:

“Never, and I mean never, schedule a single payment without having a written letter of intent,” warned Sickler. “This letter must state the total amount of debt owed, the total payment you are making to the creditor, and a statement certifying that the processing of the payment signifies payment in full for the entire outstanding debt. This is crucial. Not only do you want the debt resolved, but you need your credit report to show it as paid in full.”

(Related Reading: How Do You Contest Errors On Your Credit Report?)

What if your creditor stonewalls?

Some creditors will simply not be receptive to any negotiation. So what can you do?

“Don’t be surprised if your creditor doesn’t offer a significant relief, even though it makes sense to you that they should do so,” said Detweiler. “Creditors have their own internal policies that they must follow when consumers make these kinds of requests. Don’t take it personally. If you can’t get your creditor to work with you, consider talking with a credit counseling agency or a bankruptcy attorney.”

It’s not a good situation to find yourself in, but if you’re behind on your payments, there are some options. Hopefully, this guide helped you get a sense of what they are. Good luck!

To learn more about dealing with debt, check out these related posts and articles from OppLoans:

Have you ever negotiated directly with a creditor? We want to hear about it! You can email us or you can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN


Gerri DetweilerGerri Detweiler (@GerriDetweiler) is the education director for Nav, which helps business owners build business credit for free. She is also the coauthor of a free Kindle ebook:  Debt Collection Answers: How To Use Debt Collection Laws To Protect Your Rights.
jonas_sickler_headshot_smallerJonas Sickler is responsible for building and executing the digital marketing strategy at (@repmgmt_com). The broad scope of his role encompasses strategic content creation, web analytics, and developing and deploying targeted digital campaigns from concept to completion.

Shopping for Furniture with a Bad Credit Score? Here’s What You Need to Know


Store financing can be a good option, but so is scouring college neighborhoods around graduation and buying furniture that you assemble yourself.

When you’re trying to rebuild your credit score, there are plenty of expenses you can put on hold. It’s not that difficult to stop eating out, cancel subscription services, and stop buying groceries from an expensive health food store, for instance.

But some things are a little more difficult to hold off on—like furnishing a new apartment or house. You can’t just eat off cardboard boxes and sit on old crates until your credit improves. You need to find a way to buy some furniture.

Thankfully, shopping for furniture with bad credit is far from impossible. Here are some of the best ways to make it work.

Ask the Furniture Store.

Furniture stores often provide financing to their customers who don’t have a credit card to use for their new bedroom set. Because customers who apply for furniture store financing tend to have bad credit, their standards are lower than other lenders.

Before you pick out a mahogany dresser, ask the sales rep about their financing plans. They may have a monthly payment option or a store credit card you can apply for. Look at the terms carefully to see what the APR is, what fees they charge, and if you can repay the loan ahead of schedule.

Make sure to do the math carefully before you buy. Financing is always the most expensive option and should be a last resort, so know what you’re getting into before taking this route. Even smaller expenses like furniture can lead you down a spiral of debt that harms your credit score even further.

Watch Out for 0% Rates.

Some furniture stores will have signs advertising 0% rates for a certain number of months, which means you’ll pay no interest if you repay the loan before that time.

However, these deals can be tricky to navigate and easy to lose. If you pay your bill late, the 0% offer may be withdrawn and any interest you saved would then be added to your balance. You can avoid this by simply paying your bill on time every month and signing up for their autopay service if possible.

Read the contract carefully to make sure they won’t charge an early repayment fee if you pay off the balance ahead of time.

Look for Other Options.

Furniture stores that offer financing know their customers have bad credit scores, so they often mark up the prices to take advantage of impulsive spenders. (It’s not too different from how sketchy lenders offering bad credit loans and no credit check loans exploit people in desperate financial circumstances.) Even if you don’t pay any interest fees on your furniture purchase, you could still be paying a premium because you have bad credit.

Do your research before setting foot inside a furniture store. Salesmen are notoriously talented at leading you down a dangerous path while making it seem like a shrewd financial decision. By the time you’ve realized your mistake, the paperwork is filed and the deal is struck.

But instead of shopping at a furniture store, why not look at some more creative options? You can find decent furniture at resale shops such as Habitat for Humanity ReStores, Goodwill and Salvation Army. Local consignment stores can also be a good spot to snag a bookcase or end table. Estate sales are yet another excellent source of high-quality furniture, decor, and accessories.

Don’t forget to look at Craigslist and Facebook Marketplace where people often sell and give away perfectly good furniture at a huge discount. The Freecycle Network is worth browsing—it’s a geographically-based network where people can post free items for others to take. You’d be surprised how many people get rid of high-end pieces just because they’re redecorating or moving far away.

Mainstays like Ikea are still popular if you don’t mind assembling furniture yourself. You could buy the basics like a bed frame, coffee table, and chair for a few hundred bucks in exchange for a couple hours of hands-on work. Ikea also delivers furniture for a small fee in case your car isn’t big enough to load up your new gear.

Ask Your Friends.

No matter what kind of furniture you’re looking for, use the power of social media to help. You never know who in your circle has a dining room set they’re looking to unload. People will often give you their stuff for free if you can transport it yourself.

Don’t be embarrassed or ashamed to accept help. Most of us start out with hand-me-down furniture and don’t mind helping someone in a similar situation. If your pride gets in the way, just make sure to pay it forward when you upgrade to nicer stuff.

Get Crafty.

Ever find the perfect dining room table at your local Salvation Army, but you hate the color so you don’t buy it? Cosmetic details like color or finish are easy to change and don’t require more than a standard set of tools or brushes. You can find tutorials on YouTube on how to remove paint and apply a different finish.

New knobs on a dresser or nightstand can also make a big difference and transform a drab piece of furniture into a centerpiece. Applying decals and sticky wallpaper can completely change a boring bookshelf into a charming and unique item.

If you see a used piece of furniture with good structure and no weird smells, consider the possibilities. Could a coat of teal paint make it fit your aesthetic? Would funky Turkish knobs completely change how that entertainment center works in your living room? Don’t say no to furniture that doesn’t look perfect until you’ve considered its potential.

Scour College Curbs.

If you live near a college campus, you should check out the dorms and apartments close to graduation time. Many students put their furniture on the curb where it’s up for grabs. Universities with lots of international students are famous for having TVs and other pricey electronics available for free if you’re in the right place at the right time.

Borrow a truck or bring a friend with a spacious SUV and drive around a few neighborhoods. You never know what you might find for free.

To learn more about living with bad credit, check out these related posts and articles from OppLoans:

What are your best strategies for buying furniture with a bad credit score? Let us know! You can email us or you can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN

Can You Have Bad Credit Even With a Good Income?


Yes, you can! Your credit score doesn’t care about how much money you make, only how much you owe and whether you can pay it back.

If you earn a modest income, it’s easy to be envious of the super-wealthy. They travel around the world, eat at Michelin-rated restaurants, and shop for high-end luxury items. They enjoy a lifestyle that’s nothing more than a pipe dream for most of us.

But when it comes to credit, your score may be just as high—or higher—than even billionaires Bill Gates and Richard Branson. That’s probably not much consolation, but it is the truth.

It may seem like credit scores should increase with your income, but the truth is much more complicated. Read on for a deep dive into what makes up your credit score—and why just being wealthy can’t protect you from bad credit.

Why Credit Bureaus Don’t Care About Your Income.

Despite what many people think, your credit score is completely independent of your income. People with $20,000 salaries can have good credit scores, just like those with $200,000 incomes can have poor credit scores.

Credit scores only look at one thing—your credit. It doesn’t matter how large your 401k is or how much equity you have in your house. A credit score doesn’t show how much you earn, how stable your job is or how much you save. Though a credit score is a popular financial barometer, it’s not a comprehensive look at your finances. Credit bureaus don’t collect any information about your income—only about how you treat any credit you’ve taken on.

“The purpose of credit scores is to help assess the risk a person will not pay a debt as agreed—regardless of income,” said Rod Griffin, Director of Public Education for Experian (@Experian_US).

A lender looks at your credit score because it reflects how well you manage your credit obligations. A high credit score means you’re dependable and reliable, and a poor credit score means you’re negligent and irresponsible.

Some consumers mistakenly think income is part of their credit score because lenders ask for it on applications and can use it as a reason to deny a line of credit. If you have a good credit score and low income, you might not qualify for a loan because the lender thinks the payments will be too high.

If you have bad credit with good income, you can also be denied. According to Griffin, your credit history is typically more important to a potential lender than your income, because the former shows your track record of managing debt.

“Understanding the components of your credit report is essential because a strong credit history increases your access to the financial services you need,” he said.

How High-Earners End Up With Bad Credit.

Because income has no impact on credit, the wealthy are just as likely to have a low credit score as the poor. The rich can miss payments, rely too heavily on credit, and open too many new accounts, all of which will lower their credit score. If you’re a doctor making $300,000 a year and have $1 million in debt, for example, you’ll likely have a poor credit score.

On a practical level, it boils down to whether or not your income can support your lifestyle. We’ve all seen examples of lifestyle creep—where you start to scale up your expenses as your income increases—and the wealthy are no more immune to this. A busy mother of three working in a call center can attain a perfect credit score by diligently paying her bills, just like a superstar basketball player can tank his score with a few purchases he can’t afford.

(To read more about how your friend’s bad spending habits can affect your own, check out our blog post: Is Bad Credit Contagious?)

However, wealthy people may also have a bad credit score or no credit because they don’t borrow money. If you can afford to buy your house or car in cash and only use a debit card, you won’t build up a credit history.

The fact is, a poor credit history doesn’t really matter if you don’t need to borrow money. Many financially independent or early retirees have no credit or poor credit because they only use their debit cards.

What Makes Up Your Credit Score.

Though the exact algorithm is a secret, FICO uses the following factors to decide your credit score:

  • Payment history: Your history of paying credit bills on time makes up 35 percent of your credit score. This is the most important component and also the easiest to change. If you pay your bills on time every month, your credit score will increase. If you miss payments repeatedly, your credit score will suffer. Switching to auto-pay will guarantee you’re never late again.
  • Amounts owed: How much you owe relative to how much credit you have available to you constitutes 30 percent of your credit score. This is also known as your credit utilization ratio. If you owe $35,000 on your credit cards and have a credit limit of $100,000, you have a credit utilization ratio of 35 percent. Credit bureaus don’t like to see a ratio of more than 30 percent. Anything higher makes them worry that you can’t afford to pay down your balance and that you’re relying too heavily on credit.
  • Length of credit history: How long you’ve had credit only counts for 15 percent of your credit score. The longer you’ve had your accounts, the better. The only way to improve this section is to avoid opening new accounts and keep your oldest accounts active.
  • Type of credit: Lenders like to see a variety of credit accounts on your report, including student loans, auto loans, credit cards, personal loans, and mortgages. You won’t be heavily dinged for not having more than one or two different types of accounts, as this part only makes up 10 percent of your credit score.
  • New credit inquiries: Any time you open or apply for a new line of credit, it shows up on your credit report. New inquiries account for 10 percent of your credit report. The more inquiries you have on your report, the lower your score will be. It takes one year for inquiries to fall off, and if you’re applying for a big loan like a mortgage, it’s best not to have any recent inquiries on your credit report.

If you have a solid income and a poor credit score, there are plenty of ways you can increase your score quickly. Go through your credit report and look at any red marks. Are you bad at paying your bills on time? Or is your credit ratio too high?

Address each reason you see a negative score and work on improving those areas. You should see a higher credit score in just a few months if you follow the right steps.

To learn more about what it takes to improve your credit, check out these related posts and articles from OppLoans:

What else do you want to know about your credit score? Let us know! You can email us or you can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN


Sahil_GuptaRod Griffin is Director of Public Education forExperian (Experian_US). He leads Experian’s national consumer education programs and supports the company’s community involvement and corporate responsibility efforts. Rod oversees the company’s financial literacy grant program, which awarded more than $850,000 in 2015 to non-profit programs that help people achieve financial success. He works with consumer advocates, financial educators and others to help consumers increase their ability to understand and manage personal finances and protect themselves from fraud and identity theft.

Will Unpaid Debt Ever Go Away On Its Own? (Yes, But Don’t Hold Your Breath.)

opploans-will-unpaid-debt-ever-go-awayOnce the statute of limitations for a debt has passed, it becomes uncollectable. But in the meantime, it can still do lots of financial damage.

We all know that diamonds are forever, but what about unpaid debts? Do those come with an expiration date? While paying back the debts you owe is super important, we all know that there are times where it just ain’t going to happen. But do debts ever really expire?

The completely accurate answer is: No, they don’t. But the more realistic answer is: sort of. Because debts aren’t really like diamonds at all. They have statutes of limitations. After a while, most personal debts will become basically uncollectable.

Here’s what happens when you get sent to collections.

When you fail to pay back a debt (with loans, this referred to as “defaulting”), it gets sent to collections. Sometimes this is a separate department at the lender itself, but most of the time the lender just sells the debt to a collections agency. The same holds true with medical debt.

When you’ve been sent to collections, the agency will usually try to contact you and demand payment. They may do so by phone, email, regular mail, or text message. They might also try and employ a lot of sketchy tactics like threats or harassment or pretending they are someone that they are not.

Third party debt collection is mainly governed by the Fair Debt Collection Practices Act (FDCPA). To learn more about legal and illegal debt collections practices, check out our blog post: What Debt Collectors Can and Can’t Do.

One thing that debt collections can do is take you to court over an unpaid debt. They usually wait to employ that option because no one likes going to court, not even debt collectors. If the judge issues a ruling in their favor, they can garnish your wages—taking a portion of your paycheck until the debt is paid off.

However, there is something that debt collectors cannot do. They cannot collect on your debt forever.

Debts come with a statute of limitations.

Think about a statute of limitations like a time limit. After a certain amount of time, a debt becomes uncollectible in the same way that, after a certain amount of time, a person cannot be prosecuted for certain crimes.

Now, this doesn’t mean that you can take out a personal loan or a credit card or receive a bill for medical services and just wait it out without any repercussions. For one, failing to pay back money that you owe will wreak absolute havoc on your credit score.

Plus, these statutes of limitations last for a matter of years, so you’re much more likely to get taken to court over an unpaid debt and have your wages garnished during the period when the debt is collectible than you are to successfully wait it out.

For the most part, the statute of limitations on a debt will start ticking after the date of your most recent payment. So let’s say you take out a personal installment loan with a six-year statute of limitations, and after three years you stop making payments. The statute wouldn’t come into effect until six years after that last payment—nine years after you first took out the loan.

The statute of limitations on a debt will depend on the “what” and the “where.”

The statue of limitations on a debt will vary based on two factors: the type of contract that was signed and the state in which the debt was taken out. Oh, and when we state we mean, like, Delaware or Illinois, not “state of mind” or state of “inebriation.” (You’ll be hard-pressed to get out of a loan agreement by arguing that you signed it while drunk.)

The four basic types of loan contracts are:

  • Oral Agreement: This is debt agreement that is made verbally, without a written documentation of the agreement. (We generally recommend you don’t do this, especially with friends or family.)
  • Written Contract: This is debt agreement that is made in writing. It must be signed by both parties.
  • Promissory Note: These are like written contracts, but they include a deadline for repayment and stated information on the interest rate.
  • An Open-Ended Agreement: These are like written contracts, but they are specifically for accounts with a revolving balance, like credit cards.

And now here’s where it gets really fun. Not only are there four different types of contracts, but the statutes of limitation vary across all 50 states. That makes for a total of 200 different statutes of limitations to keep track of at the national level.

To check out a handy-dandy table that lays out all 200 statutes, check out our blog post: Does Medical Debt Really Go Away After Seven Years?

A statute of limitations is not a “get out of jail free” card for debt.

Remember that blog post we just mentioned? The one from two seconds ago? You should also read it if you’ve ever heard of the so-called “seven-year rule” for medical debt. Basically, the rule says that medical debts expire after seven years, which isn’t true at all.

This urban myth probably arose from two factors: the statute of limitations and the amount of time (seven years) that a debt will stay on your credit report. Unfortunately, it’s just not that simple. No debt ever is.

In general, it isn’t helpful to think of the statute of limitations on a given debt as a finish line that you have to cross. It is there to protect people from getting taken advantage of by predatory collectors who will dredge up old loans or medical bills and intimidate people into paying them.

If you are having trouble paying back a loan, credit card, or other debt, you should talk to a credit counselor or even contact your creditors directly to try and negotiate more favorable terms. You might even want to consider filing for bankruptcy protection.

Don’t try to outlast your debts. Instead, you should face them head on and take responsibility for them. In the long run, you’ll be much better for it.

To learn more about getting out of debt, check out these related posts and articles from OppLoans:

Have you ever had someone try to collect on a debt that was past the statute of limitations? We want to hear about it! You can email us, or you can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN

How Much More Does it Cost to Live With Bad Credit?


Having a bad credit score can make lots of things, like getting a credit card or buying a car, much more expensive.

How expensive? Well, we spoke to the experts to find out just what bad credit can end up costing you.

Bad credit means higher interest rates.

One of the most obvious and most striking ways bad credit can make your life more expensive is when it comes to interest rates for loans. The worse your credit score, the more money you’ll be paying in interest.

“For many consumers, a small missed payment or bad credit decision, can set them back financially for years,” warned Sahil Gupta, founder and CEO of Patch Homes (@patchhomes). “The reason is that credit score is key to accessing capital at lower rates. A bad credit score means the cost of accessing money goes up. Rather than getting a loan at say 5 percent, a consumer with bad credit may get a loan (if at all) at 8 percent or 10 percent.

“Take for example, a $100,000 loan for 5 years. At a 5 percent rate (good credit), the monthly payments are $1,887 for a total interest of $13,228. At an 8 percent rate (bad credit), the monthly payments are $2,028 for a total interest of $21,658. As you can see, a small difference in rate means a 7 percent higher monthly payment and a total interest paid higher by 60percent. That’s very expensive overall. This type of issue can occur across personal loans, credit cards etc. In the case of large ticket items like homes, a bad rate can mean more than a hundred thousand in additional payments. Additionally, it’s extremely difficult to get one’s credit score back-up. It’s a case of ‘stairs up, elevator down.’ Hence, poor credit can really hurt people for a long time.”

But as Gupta mentioned, this is all if you can get a loan in the first place.

You’ll have fewer options to borrow money.

Higher interest rates on bank loans are one thing. But if your credit is low enough or non-existent enough, you may not be able to get a loan from a bank at all. This will cost you even more money, especially if you become the target of predatory lenders hocking sketchy bad credit loans and no credit check loans.

They might be payday loans, with their with short payment terms and sky-high annual percentage rates (APRs). (Watch out: These loans are sometimes advertised as ‘cash advances.’) You should also avoid title loans, which have similarly high APRs and require your car as collateral.

If you want a good example of how having bad credit can make your life more expensive, just add whatever the cost of getting a new car would be to the running total. And speaking of getting a car…

Buying a car will get way more expensive.

Need a new car because a title lender seized your old car or because you just need or want one anyway? Well, bad credit is going to make that a lot more expensive.

“Bad credit is a huge disadvantage when buying a car, advised Roslyn Lash (@RosLash), an Accredited Financial Counselor and the founder of Youth Smart Financial Education Services. “You’re forced to purchase at ‘buy here, pay here’ dealerships. You’ll overpay for the car, the interest rate will be higher, and when you’re ready to trade, your new payment will include the balance of the old car. It’s a vicious cycle of bad credit and even worst debt!”

So what can you do?

Raising your credit score is a top priority.

If you want to spend less money overall, you’re going to have to get your credit back up to a good place. This means paying all of your bills on time. It means paying down your existing debt as much as you can. It might mean getting a secured credit card and only spending around 30 percent of your credit limit—plus making sure you pay your card off in full every month before it starts accumulating interest.

If you do need a personal loan and you have bad credit, try looking for an installment loan that only performs a soft credit check, meaning a credit check that does not negatively impact your credit score even further. If they report your payments to the three major credit bureaus so you can fix your credit, that’s even better.

Fixing your credit isn’t easy. But the savings you’ll get from doing it can make your life a whole lot easier.

To learn more about living with bad credit, check out these related posts and articles from OppLoans:

Do you have bad credit? How do you handle the increased cost of living? We want to hear from you! You can email us or you can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN


Sahil_GuptaSahil Gupta is the co-founder of Patch Homes (@patchhomes), a financial institution that’s focused on unlocking home-equity wealth for homeowners without any interest or monthly payments. He’s passionate about developing new and innovative ways to redefine old school products and disrupt industries.
eblack-HS croppedRoslyn Lash (@RosLash) is an Accredited Financial Counselor and the founder of Youth Smart Financial Education Services.  She specializes in youth financial education, adult coaching and works virtually with adults helping them navigate through their personal finances i.e. budgeting, debt, and credit repair.  Her advice has been featured in national publications such as USA Today, TIME, Huffington Post, NASDAQ, Los Angeles Times, and a host of other media outlets.

Can a Store Credit Card Help Fix Your Bad Credit?

opploans-can-store-cards-help-build-credit (1)

Store credit cards can be useful for building a better payment history, but they’re also a really easy way to accumulate more high-interest debt.

When it comes to building your credit history and improving your FICO score, there’s a bit of a chicken-and-egg scenario: You need a good credit history in order to be approved for a loan or a credit card, but you need to have had previous loans and credit cards in order to have a good credit history.

Folks with bad credit or no credit will find that they have some trouble getting a new loan or credit card to build up their score. If you already have outstanding debt, we suggest you focus on making your payments on-time and using a debt repayment plan, like the Debt Snowball or the Debt Avalanche methods, to lower your balances.

But if you don’t have previous debt—or you’re looking to start fresh with a new account—there are some options available to you. For instance, certain kinds of bad credit loans, particularly long-term installment loans, will report your payments to the credit bureaus and help bolster your credit history.

Another option is taking out a store credit card, the kinds that are offered at pretty much all major retail outlets. But are these cards really worth the risk? We’re not so sure. While pretty much any form of credit can be helpful if you use it correctly, we think the temptations with store credit cards are too great.

But don’t let us make the decision for you. We broke down the pros and cons of store cards so that you can decide what’s best for you.

Pro: They’re easier to get than regular credit cards.

The point of a store credit card is to get you to spend more at a given retailer. So when Home Depot issues you a credit card, it’s a card that can only be used at Home Depot. In return for you getting a small discount or earning rewards, Home Depot gets more of your business than they might otherwise.

This means that the incentives for approving these credit card applications are a little different than the incentives for regular cards. A traditional credit card company is much more concerned with issuing cards to creditworthy individuals, the kinds that have high FICO scores. But retailers? Not so much.

Basically, you stand a better chance of getting approved for a store card than you do for a regular card. Sure, they care about your credit score, but they have a much lower cut-off point.  So if you’re looking for a new account to help build up your credit, a store card is a much more viable option than a traditional card.

Con: Pretty much everything else.

Yeah. So store credit cards might be easier to get than a regular card, and they’ll give you extra discounts or rewards at the store in question, but those are the only two ways in which they can be considered any better than regular cards.

And even the “easier to get” part doesn’t really make them better than regular cards. Payday loans, for instance, are super easy to get, much more so than a regular personal loan. But the reason they’re so easy to get is that they cost way more and are actually kind of dangerous.

And while store credit cards aren’t nearly as dangerous as payday loans (or other types of no credit check loans, for that matter), they’re still much riskier than traditional loans.

Financial Coach Eric Black, the founder of Financial Freedom Mentors (@ffmentors), lays out how he and his colleagues approach store credit cards:

As a rule of thumb, we discourage our clients and followers from opening new store credit card accounts. The primary reasons are:

1.) There is little to no benefit to the cardholder. True, it can help build their credit if they are disciplined in using the card and paying it off, but most cards offer a 10 percent discount for opening the card. On a $100 purchase that is only $10. And there are only benefits to using that card at that one retailer. Other cards offer much better rewards and benefits.

2.) The results can be disastrous! While it’s easy to apply and start using the card right there in the store, one little slip-up and it will cost you a lot. One late payment, huge fees, and interest charges. The same with spending over your limit. That initial benefit you received for opening the card can quickly get wiped out.

3.) The interest rates on those cards are outrageous! They rarely offer a low introductory offer, and as mentioned above, if you make even one late payment the rate may skyrocket even higher!

4.) Settling disputes can be challenging. Unlike a major credit card company like American Express, Discover, or Chase, store credit cards are often provided and managed by small third-party financial companies. Resolving issues such as fraudulent charges, incorrect fees, etc. can be very challenging. Customer service from a major provider is far superior.

According to Barron’s, the average APR for store credit cards is 24.99 percent while the average APR for regular cards is only 16.15 percent. So your average store card is over 50 percent more expensive than a regular card. Their rates are more like the rates charged on cash advances.

Now, if you are disciplined and immediately pay off all your balances, then those interest rates shouldn’t pose a problem. In fact, so long as you pay off your balances during the 30-day grace period, you won’t be paying any interest at all. Sounds great, right?

Well, yeah. It does. But here’s the real question: Are you really disciplined enough to do that?

There are better options than store credit cards.

Credit cards can be a great way to earn rewards and to finance large purchases, but in some ways, they’re much too easy to use. Before you know it, you’ve maxed out your card, and you’re having trouble making your payments every month. This holds true for regular cards and store cards, but at least regular cards come with lower rates and better rewards.

If you’re looking to build your credit with a store card, might we suggest you use a secured credit card instead? While they don’t have many of the benefits of store cards, they also don’t have as many risks. And when you’re trying to dig your way out of a bad credit score, less risk is usually the way to go.

To learn more about fixing a bad credit score, check out these related posts and articles from OppLoans:

What’s been your experience with store credit cards? We want to hear from you! You can email us or you can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN


eblack-HS croppedEric Black is a financial coach and the founder of Financial Freedom Mentors (@ffmentors). Eric works with individuals and couples to help take the stress out of managing their finances by creating an actionable plan custom tailored to their priorities. Having gone from being broke most of the month to now having a significant real estate portfolio and a net worth of over $1 million, Eric is able to relate with his clients and the financial challenges they are facing.

Is Bad Credit Contagious?


Could the company you keep have a negative effect on your financial health?

Credit is important, but you already know that. As a person who is alive and kicking in the year 2018, you’re likely well aware of the necessity of having a good credit score. After all, having bad credit can make it pretty difficult to get a credit card, a loan, or even an apartment.

Because of this, most people have a general sense of what to do to keep their credit in the black—they can make sure to pay off their credit cards every month, make sure they stay up-to-date on all their bills, and stick to a budget so they don’t spend beyond their means.

This sounds simple enough, but it can be much harder in practice. And what if something else is holding you back from fixing your bad credit? What if the people you surround yourself with are a part of the problem? Like that killer flu we’ve been dealing with all winter, could bad credit actually be contagious?

If your friends are spending their cash like there’s no tomorrow, pressuring you to go out to expensive dinners, take lavish vacations, and buy the latest designer clothes, you may be much more willing to sacrifice the health of your credit to keep up with the Joneses.

We’re sure your friends are great but are they really worth getting stuck visiting sketchy storefronts for a no credit check loan or shopping for payday loans online? Yeah, we thought not.

Social effects are real, but they aren’t the leading cause of bad credit. 

We talked to Certified Money Coach Amber Berry (@feelgudfinances), to see whether the poor financial habits of your friends and family can rub off on you.

“If your social circle tends to have irresponsible spending habits, makes poorly informed financial decisions, and you all rely on each other for financial advice, then it can quickly become a case of the blind leading the blind,” said Berry.

“However, there are many Americans who have poor credit due to situations beyond their control like medical debt and unemployment complications. These kinds of situations don’t necessarily indicate irresponsibility.”

Berry has a point. We recently wrote about the myth that medical debt goes away after seven years (spoiler alert: it doesn’t!), and in our research for that piece, we came across a startling statistic: Medical debt is the number one reason Americans file for bankruptcy.

We repeat: Medical debt is the leading cause of bankruptcy in the U.S.

According to a 2013 report from CNBC: “Bankruptcies resulting from unpaid medical bills will affect nearly 2 million people this year—making health care the No. 1 cause of such filings, and outpacing bankruptcies due to credit-card bills or unpaid mortgages, according to new data. And even having health insurance doesn’t buffer consumers against financial hardship.”

That’s right. The number one reason U.S. residents declare bankruptcy isn’t a result of poor financial planning. It’s not because they maxed out their credit cards, bought cars they couldn’t afford, or got caught in a debt cycle from predatory bad credit loans. It’s because they got sick or had a car accident. It’s because their son had a serious disease or there was some other disaster. Many people with bad credit didn’t do anything to deserve that docked score.

Feel pressured to spend too much? Then set some healthy boundaries.

However, while there are many people out there with bad credit that’s beyond their control, others DO have a choice. If your friends and family are irresponsible spenders who put pressure on you to do the same, Berry thinks you may be better off separating yourself and your money from situations where you might be pressured into reckless financial decisions.

“If your friends and family cannot respect or support your financial goals, it could be wise and beneficial to limit your interactions with them in certain circumstances if you find maintaining personal boundaries to be a challenge,” she said.

“Examples of situations to avoid could be going out to eat with certain people if you know they tend to expect you to pay, or politely declining invitations to events that are out of your budget. It’s okay to love people from afar!”

A spouse’s over-spending is even harder to guard against.

But what if the person closest to you in the world—your spouse—is the one in the credit dumps? What if you can’t distance yourself from that person because you live with and are currently raising a bunch of tiny humans with them?

We’ve written before about how your husband or wife’s credit score can affect yours, and while there’s no such thing as a joint or “married” credit score (meaning you don’t merge scores when you tie the knot), your spouse’s financial habits can definitely have an effect on your credit score if you two have combined finances.

For example, if you have a joint credit card, joint bank account, or a mortgage, if your spouse drops the ball, you could be the one left in a lurch. Your spouse’s tendency to rely on high-interest cash advances will reflect poorly on your as well.

Take the lead on practicing healthy financial habits.

So how can you encourage your hubby, mom or best friend to pick up the slack?

“Lead by example,” said Berry. “In the case of how you manage your finances, being open about your goals and exercising discipline when temptation arises allows others to witness your journey and be inspired along the way.”

For example, Berry said that if your goal is to pay down debt, you should give yourself an allowance in between paychecks.

“Let’s say a friend invites you to the amusement park this weekend but you don’t have enough allowance money to do that. Ask your friend if they’d be willing to support you by going another weekend after your next paycheck so you can afford to have a fun time and stick to your goals. You may find that they’re in a similar situation and you can support one another.”

To learn more about living with bad credit, check out these related posts and articles from OppLoans:

Do you think your friends’ spending habits have helped or hurt you? We want to hear from you! You can email us or you can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN


Headshot (cropped)Amber Berry (@feelgudfinances) is the Certified Money Coach (CMC) ® and Certified Business Archetype Coach (CBAC)™ behind her personal finance blog She helps 9-to-5ers and entrepreneurs identify, understand, and transform their money behaviors. The Feel Good Finances community was created as a place to discuss money in a positive environment. Her work helps millennial women and beyond reach their goals and create lasting change in their personal and financial lives.

Can Bad Credit Stop You From Moving to a New City?

Can Bad Credit Stop You From Moving to a New City

A bad credit score can affect lots of different areas of your life. Moving to a new city is one of them.

Some people stay in the same place their whole lives. They’re born in a house, go to school in town, attend the college that’s just down the road, take over the family business, and start the cycle anew.

But that’s increasingly becoming the exception, rather than the rule. Rolling stones gather no moss and job stability isn’t what it used to be. Whether it’s because you’ve got a new job or because you just want a change of environment, moving to a new city can be a great opportunity.

But what if you’ve got bad credit? Can a lack of access to financial services keep you from moving to the new city of your dreams?

Your credit will likely hinder you move to a new city

Why build too much suspense? Yes, your credit will likely affect your ability to move to a new city. We reached out to it to nationally recognized credit expert Jeanne Kelly (@creditscoop) for a rundown:

“A move can be exciting, but how is your credit? If you have a not-so-good credit report, you could have some issues renting a new place to live. Another thing to think about is: If you are going to rent an automobile for the move, your credit can be checked and you might have an issue renting that van.”

“Always be prepared in advance,” says Kelly, “because credit reports can have errors and it can bring your credit score down lower than it should be. Besides the new rental, you need utilities. Oftentimes the utility companies are also reviewing your credit report for oil, electric, telephone, and more—so credit does become a factor with a new move. Think ahead of time.”

So there you have it. Your credit can impact your ability to move to a new city. Not only can it prevent you from renting a moving truck or a new apartment, it can also make your move a lot more expensive. In order to pay for those added costs, you could find yourself taking out a sketchy bad credit loan, like a payday loan with a 400 percent APR, to be able to make ends meet.

Obviously, that is something you’ll want to avoid. And one way to make things better on both your credit and your budget is to reduce the cost of relocating. That’s why we spoke to the experts to help you knock some dollars off that move.

Choose your new location carefully

You (probably) don’t want to live in some rickety tree house, but you also want to make sure the dwelling you choose is within your budget.

“If you’re moving to a new city and you don’t know it well, you should rent,” advised Ali Wenzke (@AliWenzke), who writes at The Art of Happy Moving. “Get to know the city and the neighborhoods before you make the biggest financial investment of your life. When you rent instead of buy, this gives you flexibility with your job and the city if things don’t work out (saving you tons of money in the long term). It also puts you in a stronger negotiating position if and when you do decide to buy.”

Wenzke also outlined some other things to look for when picking your location:

“Commuting costs add up. Whether you are spending money on gas, bus fare, or the commuter train, calculate what the daily cost will be to you. While downtown rents may be more expensive, it may be less of a price difference than you think when you take parking or daily travel costs into consideration. Before you move, type your potential new address into Walk Score. Do you have easy access to grocery stores, restaurants, and entertainment? Save money on that Uber and find fun things to do within walking distance of your new place. It’s good for your wallet, health, and happiness.”

Consider a “hybrid move” to save on professional help

So you found the perfect place. Or at least the closest to perfect you can get within your budget. Now it’s time to get yourself and all of your stuff to the new place. What’s the best way to go about that process without spending too much money?

“The best cost-cutting effort someone can make starts by choosing the right moving method,” Mike Glanz, CEO of HireAHelper (@hireahelper), told us. “People have more choices today than they may think. Instead of hiring an expensive full-service moving company, or breaking your back by doing it yourself—look at all of your moving options. For example, take the ‘hybrid moving’ concept that is gaining momentum nationally because it’s dramatically reducing the cost of moving.

“With a hybrid move, you simply hire local, hourly moving laborers to load and unload a rented truck or portable moving container. You can find hourly laborers (fully licensed and insured) anywhere in the country using online services such as HireAHelper. Then drive your own truck or manage the delivery of your own container. It’s called a ‘hybrid move’ because it’s part DIY and part full-service.

“By decoupling the transportation and labor, this approach is hundreds of dollars cheaper than hiring a full service moving company—and it mitigates the most popular scam employed by rogue moving companies: holding your goods hostage for more money (some moving companies will hold your goods in their truck until you pay an above-quoted price. It happens all the time.)”

4 ways to reduce your moving costs even further

Doug Keller, marketing manager at PaylessPower (@paylesspower), offered his own list of steps to cut down on the moving costs:

1. Purchase Recycled Boxes: “You can buy used boxes ahead of your move to store away some of your smaller items. Not only can this help you to save money in the event you’re having movers help you out of your old home, there is often the ability to sell back the boxes once you’ve used them, which will put even more cash back into your pocket.

2. Get Rid of What You Don’t Need: “As you go through your things in preparation for your move, make sure you note the things that can be discarded. While local movers charge by the hour, long distance movers charge by the weight and distance. That means, the more stuff you can get rid of, the better it is for you. In addition, consider selling the things you can do without. It will help to make the cost of moving a little less burdensome.

3. Enlist The Help Of Loved Ones: “You may have to offer an incentive, like some snacks, but getting family and friends to help with packing will make your life a lot easier. It will save you and the movers time and money and can even be a pleasant stroll down memory lane. Just be mindful that your loved ones are not professional movers and may require direction as well as notice in the event they are moving delicate or precious items.

4. Try to Avoid Moving at Peak Times: “The most popular time of the year to move is generally in the summer as most people try to be in their homes before the start of a school year. This leaves September through April as a sensible time to consider relocating to save money, as demand will be lower. Moreover, for those interested in moving into college towns, this is usually the time in which most leases start and end.”

And here’s how to continue saving money after your move

Once you’ve moved into a new place, there’s still a lot more work to be done. And the same is true with saving money. Just because the move is over, doesn’t mean the savings have to stop!

“Try and get a tax break,” advised Keller. “In the event that you are relocating for a job, there is a possibility that you will be able to deduct some of the expenses from your taxes. These expenses can include storage, transportation, and even the cost of hotel stays or other lodging options incurred in between staying in your old house and your new one. Just make sure you don’t throw away your receipts!”

And finally, Wenzke offered a tip that could be helpful even if you’re not moving: “My first stop in a new city is the library. You can borrow books, movies, and get access to online materials. Your public library may also have free resident passes to local attractions and there’s often some sort of free event happening.”

You got all that? Great. A commitment to minimizing the costs of your move should help you stay away from predatory no credit check loans or cash advances just to pay the bills.

To learn more about living your best life—even with bad credit—check out these related posts and articles from OppLoans:

What are some ways that you’ve saved money on an out-of-town move? We want to know! You can email us or you can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN


Mike Glanz - 2016 headshotMike Glanz is the Founder & CEO of HireAHelper (@hireahelper), a moving labor marketplace that debuted in 2007. Having worked in the moving industry for a number of years, Mike launched HireAHelper to provide consumers with a new way to move called Hybrid™ Moving – a cross between the affordability of moving yourself and the ease of paying movers to do it for you.
doug keller headshot croppedDouglas Keller has been a financial expert for 20 years, helping people reach financial stability. He works for Payless Power (@paylesspower) where he continues to help people save money on their bills every month.
Jeanne Kelly HSJeanne Kelly (@creditscoop), is an author, speaker, and coach who educates people to achieve a higher credit score and understand credit reporting. #HealthyCredit is her motto. As the founder of The Kelly Group in 2000 and the author of The 90-Day Credit Challenge, Jeanne Kelly is a nationally recognized authority on credit consulting and credit score improvement.
Ali Wenzke HSAli Wenzke (@AliWenzke), Moving Expert, moved 10 times in 11 years. Now she’s helping the millions of people who move each year by providing practical tips on how to make moving a happy experience at The Art of Happy Moving. After calling seven U.S. states home, Ali is now happily settled in the Chicago suburbs with her husband and three children. She doesn’t plan on moving anytime soon.

If You Have Bad Credit, Should You Buy or Lease a Car?

Should You Buy or Lease a Car with bad credit

Buying a car is more expensive than leasing, but a bad credit score might not leave you with much of a choice.

When you have bad credit and you’re shopping for a loan, the choices can be pretty stark. Standard installment loans from a bank are out, as are most credit cards. You’re probably stuck with a no credit check loans—maybe even a payday loan with a 400 percent interest rate.

But if you’re looking for a car, your choices aren’t going to be so bleak. Sure, you aren’t going to have as many options as someone who has good credit—and you’ll definitely have to pay a much higher interest rate—but the odds are still good that you’ll be able to buy a car.

Here’s the question: If you have bad credit, should you be buying the car? Or should you lease? Which is the better option?

What’s the difference between buying and leasing? 

The difference between buying a car and leasing one is basically the same thing as buying a home versus renting an apartment. When you buy a car, it is your property. But when you lease a car, you are only renting it from the actual owners.

Unless you have enough money saved up to buy a car outright, buying one is going to mean taking out an auto loan. You’ll be making monthly payments on that loan, and you’ll be responsible for making repairs, car maintenance, etc. Once the loan is paid off, you will be the vehicle’s sole owner.

When you’re leasing a car, you sign a contract with the dealership. In return for making your monthly payments (plus additional fees), you get to use the car for however long the lease agreement lasts—usually two to three years.

Since you don’t own the car outright, leasing a car means there will be some restrictions on how you can use it and what you are responsible for. For instance, most lease agreements cap how many miles you can drive per year, and they will charge you extra fees if the car is damaged beyond “normal wear and tear.”

There are benefits and drawbacks to both. Owning a car is more expensive, but you also come away with an asset at the end of it. Meanwhile, leasing a car means that you don’t have to deal with the responsibilities of ownership and the hassle of maintaining an older vehicle. Once your lease expires, you can always trade it in and start a new lease on a new car.

But about folks with bad credit? How does that affect the choice between leasing and buying?

How bad credit affects buying and leasing

A bad credit score is going to make both buying and leasing a car more difficult. You’re more likely to be denied for a loan or a lease, and you’re going to pay higher rates.

When you have a low score, it’s basically a signal to lenders and/or dealerships that you don’t have a good history of paying people back. That means you’re a risk. And lenders/dealerships hate risk. They’re going to charge you more money in order to protect themselves against a potential loss.

With unsecured personal loans, a bad credit score pretty much means you’re toast. In the event that you were to default on your loan, a traditional lender won’t have any way to recoup their losses—other than sending you to collections. Unless you’re taking out a bad credit loan or a cash advance, your application is going to get denied.

With auto loans, it’s a bit different. Auto loans use the car you’re purchasing as collateral. If you don’t pay the loan back, the lender can repossess the car and sell it in order to recoup their losses. This means that you’re much less likely to be denied for an auto loan, even if you have bad credit. However, you will be paying a much higher interest rate, which translates to higher monthly payments.

But when it comes to leasing, your poor credit score could really leave you stranded.

Bad credit scores are hard to deal with, especially when you don’t have a car and need one,” says Sophia Borghese, a New Orleans-based car consultant. “Getting a car that can get these people to and from a job is an important step because getting to work can improve their credit. However, knowing if it’s better to lease or buy is another story. While there are many pros to leasing a car with bad credit, there are many more cons to it.

It’s hard to lease a car with bad credit

According to Borghese, “Leasing a car can mean lower monthly and down payments, which are great ways to save money while improving a credit score, but credit score matters to car dealers.”

While using a car as collateral can help you secure an auto loan—even if it does come at a higher rate—the same doesn’t apply to a lease. If you fail to honor your lease, the dealer still owns the car, just like they always have. All they’re left with now is a broken lease and a car that is less valuable than it was when the lease began.

This means that dealerships are much less likely to lease to people with poor credit ratings—and are going to charge a lot more for the privilege.

“Car dealers only want to lease a car to a driver with high credit scores,” says Borghese. “This prevents the dealer from risking not receiving monthly payments from the driver.”

Are the lower payments for a lease worth it?

If you have bad credit and need to buy a car, the choice between buying or leasing might actually be an easy one. Depending on whether or not you can get approved for a lease, there might not even be a choice.

But if you can get approved for both a loan and a lease, then the choice becomes harder. Even with the added costs that come with a low credit score, that lease might still be cheaper than the payments on a car loan.

Does that mean a lease is better? Not necessarily.

“While buying a car for the long term can very well be more expensive, it’s easier to take out a loan than it is to lease on a bad credit score,” says Borghese. After the loan is paid off, the driver will no longer have the burden of monthly payments on the car. This can help the person with a low score do better in the future.”

Remember: leasing a car means you’ll always be making payments. There are many benefits to owning your car outright, and freeing up space in your monthly budget is definitely one of them

(Owning your car outright also means you can use it to take out a title loan. This is the opposite of a benefit.)

“All in all, a car can be expensive either way,” says Borghese, “but being able to pay what is owed is important to car dealers. If one is burdened with bad credit, they can always check out all the less expensive used car options and go from there.”

To learn more about owning a car with bad credit, check out these related posts and articles from OppLoans:

What are your experiences buying or leasing a car with bad credit? Let us know! You can email us or you can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN


SophiaBorgheseCroppedSophia Borghese has been researching and writing about cars as a consultant for Superior Honda since she moved to New Orleans from Ohio. She enjoys learning about new strides in the automotive industry and is excited about the future of car dealerships. As a small car lover, she gets excited about new sedans and hybrid cars on the market.

How to Calculate the Cost of Your Cash Advance

There are many great ways to use a credit card, but taking out a cash advance is NOT one of them!

Using a credit card can be a very smart decision if you do so responsibly. In fact, there are actually many benefits to sensible credit card utilization: you can use them to up a bad credit score, earn cash back and signup bonus rewards, and even finance major purchases without interest during introductory periods.

However, credit cards can be a double-edged sword. One side has the ability to pull you out of a bad credit slump and improve your financial life, and the other can tank your credit score, and put you in a cycle of debt that could take years to get out of. It all depends on how you use it!

According to the Federal Reserve of New York, total U.S. credit card debt rose by $26 billion in 2017’s fourth quarter and is currently sitting at a whopping $834 billion. That’s a lot of debt on a lot of credit cards!

And OH BOY are there quite a few ways to use a credit card poorly, as many Americans know all too well. While we all know that racking up a balance you can’t pay off and maxing out your cards is bad for your financial health, one of the most expensive things you can do with a credit card—taking out a cash advance—isn’t usually the first thing that comes to mind when you think of irresponsible credit card habits.

But the reality is, credit card cash advances can cost you some serious coin.

What is a cash advance?

A ‘cash advance’ can mean several different things.

First, there are cash advance loans, which are essentially payday loans by another name. These short-term, high-interest, no credit check loans are offered by many predatory lenders looking to make a buck off your back.

In order to get one, you’ll typically write a check to the lender—dated on your next payday—for the amount of your loan plus interest, and in exchange, the lender will give you the cash you need.

On your next payday, the lender will cash your check, and if you don’t have enough money in the bank to let that check go through, you’ll be stuck in a rollover cycle of debt, paying insanely high interest rates on what’s typically a relatively small amount of money.

Second, there are employer cash advances. Not all employers offer them, but if yours does, you can request to receive a portion of your paycheck early. These kinds of cash advances typically don’t carry any interest, as you’re only getting money that’s yours a few weeks before you normally would.

In contrast, credit card cash advances are a whole different beast and a pricey one at that. While not quite as expensive as taking out a cash advance loan, credit card cash advances come with often hidden fees and interest.

Essentially, when you take out a credit card cash advance, you’re using your credit card in the same way you would a debit card. You can go to an ATM or bank, and use your credit card to withdraw cash.

The difference between using a debit card to get cash and using a credit card to get cash? When you use a debit card, the money you’re taking out is already yours. But when you use a credit card to get a cash advance, that money isn’t coming from your bank account.

Every single time you use a credit card, you are taking out a small loan from your credit card company. If you pay back those loans in full every month, you can usually avoid paying interest on them.

But you can’t avoid paying interest on a cash advance.

How much does a cash advance cost?

Not every credit card company allows cash advances, and for those that do, the rates can vary wildly. According to the New York Times, the average APR for a cash advance hovers at around 24 percent, nearly 10 points higher than the average rate for a regular credit card purchase, which is around 16 percent.

Additionally, while most credit cards offer a grace period in which you can pay off your balance without paying any interest on it, there is no grace period on a credit card cash advance. Interest will begin incurring the moment you take out the cash and will continue to build until you pay it back in full.

On top of all this, there’s often a flat fee associated with credit card cash advances – typically around 3 percent of the total amount you take out. That means if you take out a $1,000 cash advance, you’ll be paying an additional $30 in fees, on top of the interest that immediately starts accruing.

Let’s go further with that hypothetical $1,000 cash advance. Let’s say the APR for cash advances on your card is 24 percent, and the flat fee is 3 percent. If it takes you a month to pay back your cash advance, you’ll be paying a total of $1,050 when all is said and done. You’re paying $50 for the privilege of having cash on hand, a high price to pay, no matter how convenient it is.

If you’d just made that $1,000 purchase on your credit card and paid it back within the grace period, that $50 would still be in your pocket, waiting to be put into savings, or spent on a nice dinner out.

How do I calculate the total cost of my cash advance?

Want to calculate how much a cash advance would cost you? Your first step is going to be pulling out your credit card contract, and locating the interest and fees your lender charges for a cash advance. Once you find that information, plug it into this equation:

Your monthly interest owed = ((the amount you’re borrowing x (APR/100))/365) + the flat fee

In the case of the $1,000 cash advance with the 24 percent APR, it would look like this:

$1,000 x .24 = $240, or the total amount of interest you’d pay on this if it took you a year to pay it back.

240/365 = $0.65, or the total amount of interest you’re paying on this cash advance every day you don’t pay it back.

So, if you took a week to pay back this $1,000 cash advance, it would cost you $4.60 in interest ($0.65×7), and $30 for the flat fee. In total, you’d be paying $1,034.60 on that $1,000 cash advance.

Is there ever a good time to take out a credit card cash advance?

In short, no. If you need cash—ike, actual paper cash—right now, there are typically a few other options you should explore before heading over to the nearest ATM with your credit card in tow.

Instead, consider using a digital payment app like Cash App, Venmo, or Paypal to send people money instead of paying them in cash. In this new modern world, even farmer’s and flea market vendors very often take digital payments.

If you find yourself frequently needing paper bills, make sure to take out a portion of your paycheck in cash whenever you deposit it. That way you won’t have to pay ATM or cash advance fees when you head out to your favorite cash-only tapas place.

Even writing a check and taking it to a check-cashing store is a better option than taking out a credit card cash advance. You’ll still have to pay a fee to get your cash, but you won’t be charged any interest.

If you find yourself in an emergency situation where a cash advance is your only option, just remember to do the math first. Calculate exactly how much this cash advance is going to cost you, and budget out ways to pay it back as quickly as possible.

In general, you deserve better than a costly cash advance.

To learn more about the dangers of predatory lending, check out these related posts and articles from OppLoans:

How much does a cash advance cost on your credit card? Let us know! You can email us or you can find us on Facebook and Twitter.

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