The general understanding of the public is that payday loans are bad and credit cards are better. Is this fundamentally true? Is this possibly a misunderstanding of how both credit cards and payday loans, work? There may be an underlying misrepresentation of both of these borrowing options in the public view.
Credit Cards are Abused
Borrowers tend to unintentionally abuse credit cards. People borrow unreasonably, without dedicating the proper time and financial commitments required to borrow sensibly and fairly. For example, look at a typical credit card limit. The limit may be $2,000. The credit card company will promote further increases after a single few good payments. In time, the credit card balloons past what the borrower could initially afford without any increase in their pay.
The initial credit card limit was established based on income. The $2,000 is not pulled out of thin air. If a borrower borrows and pays back a few payments, they are jumped up to $3,000 or more. Now, the borrower takes that as an opportunity to borrow more heavily, despite the condition of their current income.
The Manipulation of Credit Card Providers
Credit cards are flexible in this way, which can make them so addicting and appealing. Short term consumer loans avoid this nonsense by offering a limit that fits every individual’s current situation. Credit limits can go up, but the fees go up as well.
The total payoff period is extended. It is also possible to see a credit limit diminished as some credit companies have done in the past. If a borrower borrows heavily and keeps the limit high, the lender can lower it to encourage payment and discourage future purchases that the person can’t afford.
The problem people have with credit cards is not necessarily a problem with the credit cards themselves. It is a problem in the way they use the credit cards. The distinction has placed a potentially unreasonable mark on payday loans. Loans through Blue Trust Loans are fairly limited and are not open to the various ins and outs of many leading credit card providers. It may be better to have one solid loan that three or four credit card based loans.