Payday Loans Take Place of Credit Cards in American Budgeting

Payday loan companies

Payday loan companies are one of the last funding companies willing to work with consumers instead of take advantage of them. Contrary to credit card companies, these companies have a very short term relationship with borrowers. There are no long-winded contracts, penalties or fees attached. Payback is simple because it is automatically deducted from qualified borrower’s account on a specified date. For those who are eligible, payday loans are simple, short and quick.

Credit card companies evolve

Thankfully President Obama’s cabinet has stepped into the credit card problems of the recession. “I trust that those in the industry who want to act responsibly will engage with us in a constructive fashion,” he stated. The House and the Senate are working together to introduce bills that protect consumers against unscrupulous tactics of credit companies. “The days of any time, any reason rate hikes and late fee traps have to end,“ he added.

The problem of protecting consumers from credit companies has grown exponentially since entering the 2007 recession. Credit companies are suffering and their lending policies are not bringing in cash as they expected. The American public is at a financial loss and not paying debt. In response, the companies have taken to tactics such as slashing credit limits to lower than what customers have charged, automatically placing them at a higher interest rate.

They also have outrageous jumps in credit rates if a customer is one day late, oftentimes not announcing the “close of day” is not necessarily at the end of the day. “We were good customers,” stated Natalie Breuer of Plainville, Kentucky. “We paid our bill at the ‘end of day’, around 4:30pm only to find out that the credit card company closed their day at noon. That sent us into a tailspin because we were now technically late payers and our interest rate shot up to 23% as a result. We can’t afford that.” Breuer is not alone in her complaint. This is a tactic that the Obama administration would like to abolish.

How to find money

With credit companies making rules one-sided in their favor, many consumers are looking to payday loans as a way to fend off high interest rates and late fees. Maggie Burkot, a credit card user, stated that she “used credit cards in an emergency. Now, paying my credit cards off in time is the emergency that I need extra money for.”

With banks and credit lenders closing their doors, it’s difficult for Americans to maneuver their ways through financial strains. Many are copying large corporations and making large cut-backs in their spending. Discount stores’ attendances are up like never before and large retail outlets that once were favorites are suffering. People want more for their dollars and will travel farther and out of their comfort zone to get it.

In the end

Credit cards were a good way to pay bills in the past and served their purpose. With the recession however, they are no longer able to offer credit like they used to. Payday loans are proving to be more beneficial to the qualified applicant by keeping the relationship short and simple. Hopefully, credit card companies can see the business model of payday loan companies and learn to work with their clients, instead of against them.