Page 25 - aruba-today-20190831

BUSINESS Saturday 31 auguSt 2019
A25

How a credit card loan's fast and easy cash can cost you

By Steven Nicastro fers the cash to your bank you have excellent credit,
NerdWallet account within a couple of and higher loan amounts.
Associated Press days. Citi will alternatively They also show up as sep-
Credit card companies mail a check. arate accounts on your
want to turn your unused The loans have payback credit reports, helping to
credit line into cash that terms of one to five years, diversify your accounts and
you can borrow for things and monthly repayments indicate you can handle
like home improvements are added to your card's different types of credit, ul-
or unexpected expenses. minimum payment due. timately lifting your score s.
But accepting this loan of- Citi and Chase say they re- — If you qualify, a 0% APR
fer may not be the best port payments to the credit credit card is an interest-
choice for your wallet or bureaus as credit card free loan, as long as you
your credit score. payments, not as separate pay the balance before
In recent months, two of loan payments. the introductory offer pe-
the largest credit card issu- Having different types riod ends.
ers, Citi and Chase, have of credit on your reports In this Aug. 11, 2019, photo, U.S. currency and credit cards sit on Also, you may earn cash
announced they'll offer can positively affect your a table at a restaurant in New Orleans. back or travel rewards with
credit card loans to eligible scores. In this case, "there's Associated Press this credit card.
cardholders. Citi is offer- no added benefit to your "If you're able to get a
ing its Citi Flex Loan, while credit score, beyond just Counseling. consider features that build credit card with no interest,
Chase plans to launch My having a credit card and COMPARE ALTERNATIVES your credit or offer flexible and you pay it off within
Chase Loan in late 2019. making a payment," Rae Whenever you borrow, payment schedules. the time frame, you're go-
The new products appear says. compare interest rates on — Personal loans may of- ing to be way better off fi-
to be aimed at taking a You can continue using multiple loan options and fer lower rates, especially if nancially," Rae says.q
share of the ballooning your credit card, but you'll
market for personal loans, want to track your balance
which hit a record $143 and stay under the credit
billion in the first quarter of limit to avoid costly fees.
2019, according to credit You also won't get cash
reporting agency Tran- back, miles or points with
sUnion, an increase of the Citi or Chase loan.
19.2% year over year. THE COSTS AND RISKS
Credit card loans are fast, Rae advises the loans
convenient and cheaper should only be considered
than cash advances. But for emergency expenses
personal finance experts if you don't have savings,
say the loans are still costly rather than discretionary
and can lower your credit purchases.
scores, making it more dif- "If you're trying to book a
ficult to obtain credit with vacation or shopping for
low interest rates in the fu- clothes, I wouldn't recom-
ture. mend this product," he
Before you accept this says.
seemingly simple way to Credit card loans may cost
get cash, consider the risks less than cash advances,
and compare your alterna- but they aren't cheap.
tives. Citi Flex Loans carry an-
HOW A CREDIT CARD LOAN nual percentage rates that
WORKS range from 7.99% to 8.99%,
Citi and Chase customers while My Chase Loan offers
don't have to request a vary from 16.99% to 22.24%
loan — or even apply. The APR for borrowers with ex-
companies are promoting cellent FICO credit scores
their "flexible financing of- (over 720).
fering" or new "loan feature" For example, a five-year,
via email, direct mail or on $5,000 Citi Flex Loan at
account log-in pages. 8.99% APR would have
"It's very tempting because monthly payments of $104
it's so fast and easy, with and total interest of $1,226.
no application," says Da- Taking the loan also in-
vid Rae, a certified finan- creases your credit utiliza-
cial planner based in Los tion rate — how much of
Angeles. "If you're already your credit limit is used.
in debt, it can cause that Most financial experts rec-
debt to snowball and be- ommend keeping your to-
come a big problem." tal utilization below 30%.
The amount you can bor- This loan can push you
row depends on how much above that threshold and
credit line you have avail- lower your credit score,
able. Once you choose a says Bruce McClary,
loan amount and repay- spokesperson for the Na-
ment term, the issuer trans- tional Foundation for Credit