Credit Takes Back the Reins from Payday Loans
In recession, payday loans replaced credit
During the recession, payday loans replaced credit card spending. Consumers have always used credit and have become growingly dependent on it for purchases. In particular big-ticket items were always bought with credit. In late 2007, credit problems began. Lenders pushed more and more credit onto the consumer and paid no attention to whether or not they had the ability to pay the money back. It caused many people to go into default on their loans and sent credit card companies reeling with outstanding debt.
Credit lenders started using tactics of their own to mitigate their losses. Some credit companies cut people’s spending limits drastically. For example, Mara Lindley, consumer in Toledo, Ohio, said, “Our credit card limit was $30,000 pre-recession. Then our credit card company cut that limit in half, even though we had $16,000 in charges on the account. … Then they started charging us huge over-limit fees, but we didn’t have anything to do with being over our limit!” Lindley is not alone. Many consumers saw credit card companies get aggressive.
Post-recession: what can consumers expect
Now that the recession is deemed “over” by some experts, what can consumers expect from their credit companies? It seems that most credit card companies are still trying to manage huge losses but are ready to start offering consumers services and specials again. Here are some benefits of credit cards that people should take advantage of:
- Credit card companies will arbitrate discrepancies. One of the biggest advantages of having and using credit is that if there are problems, companies will go to bat for the consumer. For example, if a consumer finds a charge on their statement he or she can call customer service, but say that gets them no where. Or, say the company insists they pay the charge regardless of their argument. The buyer can still turn to their credit card company and file a formal dispute. The company then contacts the party that charged the account and they hash it out. A lot of times a credit company has more power to sort issues out on the behalf of their clients than individuals do.
- Automatic bill pay is invaluable. Let’s face it: today’s world is a busy one. Who has the time to remember when every utility bill is due or when every payment is sent out? The best way to handle finances these days is to use the auto-bill-pay option credit card companies offer. Consumers can sign up and let the credit card company automatically issue payments. This is a great tool for anyone with a busy life. It can help a consumer avoid having to use savings, payday loans or family lending to cover expensive late fees.
- Protection against identity theft. Finally, using credit cards can be a great way to thwart identity thieves. For the most part, consumers will have a said amount of time to dispute a charge, normally 60 to 90 days. Once they do, the credit card company will investigate, issue them another card if necessary and the matter is taken care of. It’s invaluable to have a large company working alongside a consumer to protect their personal information and bank account.
Payday loans still viable options
Although credit cards are becoming a reliable tool for consumers to manage their debt, payday loans are still on the table as a good option for immediate cash needs. These short term loans are a great way for consumers to find extra money for emergency medical bills, car repairs or other surprise expenses. While credit cards may not work in all situations, payday loans are secondary funding options that prove their worth time and time again.