Financial Inventions That Hurt More Than Help
Over the last few decades, a surge of financial innovation has occurred that has created hundreds of new financial products that are not well understood by the common consumer. Some of these products have been designed to be helpful and beneficial to consumers, but some of the others seem to have been created merely to transfer wealth from your bank account into the coffers of the business owners. Here are some financial products that do little to nothing to help the person that purchases them.
Credit Card Payment Protection
Credit card payment protection services are advertised by the credit card companies as insurance to protect yourself from the high fees and charges associated with not being able to make your credit card payment in the event that you become sick or disabled. For a nominal monthly fee, which is charged directly to the credit card and added to the balance of the account, the person will not incur penalties if they cannot make their payments and can prove that one of these actions have occurred in their lives. The amount of time that this coverage is valid after the qualifying event differs from company to company.
The biggest problems found with credit card payment protection is that the premiums for the insurance are extremely high for the balance that it is covering and there are so many exclusions and disqualifying actions that very few people qualify for the assistance when it is needed. Instead of paying the credit card companies for this protection, most people would be better served by placing money into an interest bearing savings account and using that money to pay their bills if they lose their job or have a medical emergency.
Cash Advances
Cash advances are one of the worst financial products on the market today because the interest rates and associated fees are so incredibly high, often equaling 300% to 500% interest on the loan. These advances can typically be obtained by using your credit card at an ATM or submitting your employment information to a payday loan lender and can range in amount from $100 to $800 depending on your situation. Cash advances obtained by payday loan lenders usually must be paid back to the company within 21 days of obtaining the advance.
Many of the individuals that resort to taking cash advances from a payday loan lender are unable to repay the loan within the timeframe given without taking out another loan or cash advance to cover their everyday expenses. This leads to a vicious cycle of debt where the person is borrowing money from other sources to be able to pay back the payday loan on time. It is very difficult to use a cash advance without causing future financial hardship so it is best that these loans be avoided altogether and you find other sources of financing to use to solve your problems.
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