If you have a strong desire or need for a big ticket purchase this coming year but don’t quite have the money upfront to purchase the item at check out, you may have an offer extended to you at the register, it’s a deferred interest credit card or zero percent interest financing. Many large box retailers offer in store credit cards that defer the interest on your purchase for a set period of time. Sound like a deal? Read the fine print.
If you don’t pay the card off in time not only are you responsible for the initial amount of the purchase but for the interest that was deferred. For example, Best Buy has a promotion offering no-interest 18-month financing which you decide to take advantage of at the register, the cost of the washer and dryer you purchase is $2,500. The amount you pay for the washer/dryer depends on your choice of financing:
- $2,500 is the price you pay if paid in cash
- $2,500 is the price you pay if you pay the card off on time and before the 18 month promotional period
- $2,953 is the price you pay if you use a traditional credit card with a 12.5% APR over 18 months
- $3,390 is the price you pay if you use the “18 month financing” offered by the retailer, and if the total purchase amount is paid right after the due date, this triggers the retroactive 24% APR from the purchase date
As stated in the WSJ, “The National Consumer Law Center, which has long called for a ban on deferred-interest cards, plans to urge the U.S. Consumer Financial Protection Bureau…to propose rules that would restrict lenders from offering the program.” One of the issues with these cards are the extremely high interest rates used to finance the purchases which can range from 24%-35% if you are late making a payment.
Regardless of the high interest rates - promotional financing programs such as these often help those individuals who don’t have the upfront money to purchase needed items. There are alternatives to help you purchase needed items. The average national credit card rate according to creditcard.com is 14.96%, the average home equity line of credit is 4.57% according to bankrate.com, and we estimate the average rate of structured settlement transfers is 13% with the lowest of rates being around 6.5%.
The good news is you have options, so make sure you read the fine print and have the appropriate budget to pay for your purchases.
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The Office of the Comptroller of the Currency (OCC) is investigation JPMorgan Chase for allegedly trying to recover credit card debt for more than what the customers owned, American Banker has reported. In addition, the bank is being investigated for process flaws, robosigning and procedural shortcuts.
The investigation is the result of allegations made by former Chase executive Linda Almonte, who filed a whistleblower complaint after being fired for refusing to be a participant in the alleged fraud. Almonte is subject to a gag order due to the settlement of her wrongful termination lawsuit.
The article stated that in 2009, Chase earned more than $1.2 billion from old credit card debt. Unfortunately, some current and former Chase employees have stated that they were pressured into signing documents for unverifiable debt amounts. The magazine also stated that documents were often destroyed if they favored the debtor.
In response to the federal probe, Chase dropped recovery lawsuits around the country and fired five in-house attorneys, according to the Wall Street Journal.
Based upon interviews with current and former Chase employees, the bank’s errors “could call into question the legitimacy of billions of dollars in outstanding claims against debtors and legal judgments Chase has already won,” American Banker reported.
Many Americans have been experiencing hard times thanks to our economy. Sometimes, things we once took for granted such as having a new car or a nice home, are considered luxuries that are out of reach. So what can you do if you can’t afford your car payments?
Refinance – Sometimes refinancing your car loan may lower you payments to where they’re affordable. Sometimes even with refinancing the payments are still too high. It helps if you can put a little money down.
Sell it – Look at online pricing guides to determine your cars value if you were to sell it privately. Make sure you clean it and wax it to maximize its worth.
Lease transfer – If your car is leased it will be expensive as well as difficult to get out of the contract. However there is one way that won’t affect your credit score and is significantly cheaper than early termination. You can transfer the lease to another person through the use of a third party agency.
Sell used items – Many times there are items in your home that you’re not using that you can sell on websites like eBay, Craigslist or Amazon for cash you can use to make your payments or pay down your loan.
Sell illiquid assets – If you have a single premium annuity, structured settlement annuity or other periodic payments you can sell some of your future payments for a cash lump sum. Use the money to pay off your car as well as other high interest debt. There are no credit checks and since it isn’t a loan you won’t have to pay the money back.
Paying off your car loan not only helps you with your creditors, it saves you money. For example, if you financed $18,000 for 60 months at 9.5% interest your payments are $378/month. At the end of the loan you would have paid $4,682 in interest so your $18,000 car actually costs $22,682. If you decided after a year to pay off your balance in full ($15, 047) you will save yourself $2,979 in interest.
If you're having trouble paying for your car and you also have credit card debt, it makes sense to pay that debt off immediately. For example, if you had $18,000 in credit card debt and the annual percentage rate was 19.8% interest; your minimum payment is $360. If you only paid the minimum, it would take you 8 years and 9 months to pay it off and you paid $20,342.04 in interest. By paying $1,800 a month you will have your balance paid off in 1 year and you will only pay $1,833.78 in interest thereby saving you $18,508.26 in interest. Obviously if you paid off your debt completely, you would save thousands in interest.
If you’re looking for a way to get rid of your debt, avoid repossession, avoid foreclosure or purchase a car without payments selling some of your future payments to Rescue Capital for a cash lump sum may be your best option. To learn more about our program and how we can help you, call 866.688.3532.