Disadvantages of Credit Cards Compared to Lump Sum Annuity Payments

Disadvantages of Credit Cards vs. Annuity Payments

Oftentimes, people turn to credit cards if they want to make large purchases or if they’re experiencing financial difficulties. If you’re not too familiar with credit cards, a lot of the terminology can be a bit confusing. You could end up paying fees you didn’t prepare for, or that you didn’t even know existed. As you sift through applications and credit card offers, it’s good to know what these fees are, exactly, and to keep an eye out for them. If you are receiving long-term annuity payments, consider the benefits of selling those payments and how these advantages can easily outweigh the disadvantages of credit cards. As you explore your options, keep the following credit card fees and terminology in mind, which can easily be viewed as drawbacks to credit cards:

APR

Every credit card will have an APR, which stands for annual percentage rate; this is the credit card’s interest rate and it is how much you’ll pay in financing charges. This number can vary widely, and what is considered “low” or “high” will also differ by specific loan or credit card. Generally speaking, anything below 14 percent is considered medium to low. Some credit cards will even have zero-percent introductory offers for new customers, but it’s important to know what the APR will become once that introductory period is up because it can be significantly higher. Ideally, you’ll want to pay off anything you charged before that introductory period is up.

Annual Fees

Not all credit cards will impose annual fees, and often, these annual fees will be tied to certain perks and awards. For example, credit cards with annual fees might offer points for every purchase you make, which can later be redeemed for travel, merchandise, or other rewards. These types of credit cards can be good for some consumers, but just be aware of what you’re getting into before signing up, including the annual fee amount, the APR, and so on. The last thing you want is any unwanted surprises when your monthly statement arrives.

Cash Advance Fees

If you ever need to use your credit card to withdraw cash at an ATM, instead of your debit card, you’ll have to pay extra for it. Although it will depend on the specific credit card you’re using, the average fee for a cash withdrawal ranges from two to eight percent. This also includes using any of the cash withdrawal checks that arrive with your monthly billing statements. Because these fees can quickly add up, it’s important to think carefully before using your credit card for a cash advance. However, annuitants have the opportunity to have cash on hand if they sell future annuity payments in exchange for a lump sum.

Late Fees

If you’re late with your monthly credit card payment, you could be required to pay extra fees on top of what you already owe. Depending on the terms and conditions that your credit card issuer has put in place, you may need to pay anywhere from $25 to $35 for missing your payment deadline. Sign up for payment alerts so that you never miss a payment deadline again, or enroll in automatic debit so that your payments are made automatically each month. If you are struggling to keep up with credit card payments, selling your annuity payments can help you pay down your debt.

Contact DRB Capital

The disadvantages of credit cards can lead to high debt. Do you need to catch up on credit card bills and other debts? We may be able to help if you’re receiving annuity payments. By purchasing your future payments, we can get you your money sooner. There are a lot of things you can do with your cash by receiving it sooner and in a lump sum, rather than receiving it in smaller installments over a longer period of time. Many of our sellers use their lump sum to eliminate debt once and for all. Contact us today at 877-894-4541 to learn more about selling some or all of your future payments for a lump sum of cash!