Credit Cards, Debit Cards and Your Overdraft
Sometimes it’s hard to make that paycheck last and you need just a little bit more to get through until the next one. So what options do you have at your fingertip that you can rely on at the last moment? If you have them, the first thing you’ll naturally think of is your credit card and overdraft. Should you?
Credit card companies do not live off the comparatively small percentage they take in on every transaction or, for those that charge them, annual fees. They make the bulk of their money by charging you interest on delayed payments. That’s why they allow you to pay only a portion of your statement this month and push off the rest to the future. It’s not generosity. It’s business. And it’s also a very profitable one.
Many credit card companies provide a grace period before calculating interest. If your payment arrives one day late but on a holiday, for example, they may ignore the tardiness, since it wasn’t your fault that they were closed and the post office didn’t deliver the mail. Even if their computerized systems aren’t programmed to take the calendar into consideration, you can call their service centers and point out to them that you did your part on time and they might correct your statement as a result.
How much you really pay for credit card interest
But if you do delay paying off your statement on time, be prepared to pay the interest, and it can be considerable. The Federal Reserve reported that the average credit card interest rate was 12.77% in May 2017. But that’s not the whole story.
The standard interest charged for delayed credit card payments is known as the Annual Percentage Rate (APR). The APR varies from card to card, plan to plan and person to person. Cards that offer rewards, for example, tend to charge the highest interest rates in order to pay for their discounts and gifts. But your own APR is largely based on your credit score. While the APR is, by definition, a statistic that applies to the entire year, the credit card companies use it to calculate their charges on your monthly statement. So to know how much interest you’re actually paying, you have to convert your APR into a daily percentage rate by dividing it by 365, the number of days in a year. At the end of each day, the card issuer multiplies your current balance by the daily rate and then adds that daily interest to what you owe. This procedure is called compounded interest. What that really means is that the longer you don’t pay off your balance the larger the debt grows because it now includes the back interest you have not been able to pay off.
What about bank overdraft?
Debit cards are really a form of overdraft protection, since the entire amount of your monthly statement is subtracted from your bank account balance just as if you were to withdraw cash from an ATM or write someone a check.
While most banks charge similar fees for an overdraft, their rules for how and when they do so may vary. One of the lesser known facts about overdraft is that there are several different overdraft fees. As a package, they can be among of the highest fees that banks charge. Apart from the standard overdraft fee, these include an insufficient funds fee, an overdraft protection fee and an extended overdraft fee. These add up and can quickly surpass the interest consumers are charged on credit card debt.
Recent Articles
3 Basic Tips on How to Use Credit Cards
In this blog post we will share 3 useful tips and advise on how to properly ...3 Ways Installment Loans Can Help Your Credit Score
Your credit score can greatly affect your financial life. Simply put, it ref...How Credit Card Debt Affects Your Life?
Being irresponsible with credit cards can lead to a financial disaster and a...Happiness skills to pay off your debt
Getting out of debt is possible if you have the right tools and motivation. ...Have questions?
Please call us by phone:
Get your money today
Apply for a loan NOW!
Applying does NOT affect your FICO® Score!
Credit Cube © 2024. All rights reserved
CreditCube is a Tribal enterprise, wholly owned and operated by the Big Valley Band of Pomo Indians, a federally-recognized American Indian tribe and sovereign government. Any Agreement entered into as a result of this Application shall be governed by applicable Tribal and federal law. Each aspect of communication and transaction with/on this site will be deemed to have occurred in CreditCube’s Big Valley Band of Pomo Indian Reservation offices, regardless of the location where you are accessing or viewing this site.
⚠ Please note: This is an expensive form of borrowing. CreditCube loans are designed to assist you in meeting your short-term borrowing needs and are not intended to be a long-term financial solution! Examples of emergency reasons why these loans might be used include unexpected emergencies, car repair bills, medical care, or essential travel expenses.
* Loan approvals are subject to underwriting. Approval may take longer if additional verification documents are requested. Not all loan requests are approved. CreditCube reviews your information in real-time to determine whether your information meets our lending criteria. You acknowledge that by completing and submitting the website application that you are applying for a Loan. We verify applicant information through national databases including, but not limited to, Clarity Services, Inc., a credit reporting agency, and we may pull your credit in order to determine your eligibility and ability to repay.
** Maximum loan amount is $500 for first-time customers. For returning CreditCube customers, rates may go down over time based on your CreditCube Loyalty Program status and your payment history with us. Please see our Loyalty Program page for more information.
*** Loan Applications processed and approved before 3pm EST Monday-Friday are typically funded on the next business day. Example: If your loan is processed and approved on Friday before 3pm EST, the loan will typically be funded on the following Monday. Deposit times may vary depending on your bank. Business Day means Monday through Friday excluding all federal banking holidays.
CreditCube does not lend to residents of Pennsylvania, Connecticut, Minnesota, New York, Vermont, Virginia, West Virginia and Georgia. Availability of installment loans in your state is subject to change at any time with or without notice at the sole discretion of CreditCube.