Connect with us

Bad Credit

Best student credit cards for October 2020

Published

on

College and high school look a lot different this year. But whether students are on campus or learning at home this fall, there are still plenty of back-to-school expenditures. And if a student doesn’t already have a flush checking account in place, many of those purchases will need to be put on a credit card. But it’s not always easy for a student to get one from a typical credit card company — especially if they don’t already have a steady income and good credit.

Credit is a Catch-22: It’s important to have, but hard to get — unless you already have it. Student credit cards address that conundrum. They provide a way in for those with a limited credit history by providing a small credit line. Credit card companies take the risk with the hope that most students will transition into full-time employment and stick around as profitable customers for years to come.

Best student credit cards

Best overall Best for students without a credit history Best for students who plan to carry a balance Best for students with a cosigner
Discover it Student Chrome Deserve Edu Credit Card Chase Freedom Student Bank of America Travel Rewards
Annual percentage rate (standard / penalty) 17.99% variable, with 0% for the first 6 months / None 18.74% variable / None 14.99% variable / None 14.99% to 22.99% variable
Late payment fee Up to $40 Up to $25 Up to $39 Up to $40
Cash back reward rate 2% on gas and dining (up to $1,000 in combined purchases each quarter), 1% on all other purchases 1% on all purchases 1% on all purchases; 4% cash back on Lyft until 2022 1.5% on all purchases
Eligibility requirements No credit history required, proof of income required No credit score required; no social security number required for international students Cosigners not allowed, proof of income required Cosigners allowed
Annual fee $0 $0 $0 $0

Most credit cards require applicants to have a high credit score (around 650 or so) and at least a few years of credit history. To get a student credit card, however, you don’t necessarily need either — though some proof of financial experience and responsibility helps when it comes to securing a credit card offer. Issuers look at sources of income — even from part-time work or deposits from parents — as well as information about checking and savings accounts to get a sense of an applicant’s saving and spending. Luckily, once a student is able to get a card, simply making everyday purchases is an easy way to build credit (so long as the student is able to pay off their purchases).

In addition to more relaxed eligibility requirements, the best student credit card offers some of the following features:

  • Special rules for credit newcomers such as minimal late fees and no-penalty APRs
  • Lower credit limits — usually between $500 and $2,000
  • Cashback rewards program on spending
  • A “reasonable” APR — usually between 15 and 20%

We evaluated 19 credit cards marketed specifically to students. We selected four cards that stood out across a range of criteria including APR, forgiveness for credit mistakes, cash rewards and lenient eligibility requirements. Check out our picks below as well as some answers to frequently asked questions about student credit cards at the end of this article. We’ll update this list periodically.

The best student credit card overall

  • Standard APR: 17.99% variable (0% for the first 6 months)
  • Penalty APR: None
  • Late payment fee: Up to $40
  • Annual fee: $0
  • Cashback rewards: 2% on gas and dining, up to $1,000 in combined purchases each quarter; 1% on all other purchases 
  • Foreign transaction fee: 0%
  • Standout feature: No late fee for first late payment
  • Eligibility requirements: No credit history required, proof of income 

The Discover it Student Chrome offers a winning combination of cash back and other rewards as well as lenient terms for first-time credit card holders. You won’t get dinged for a late payment — at least the first one — or have to deal with an exorbitant penalty APR. And, of course, getting 1 to 2% back in rewards each month is a welcome bonus. Note that Discover offers another similar student credit card, the Discover it Student Cash Back credit card, but the rotating bonus categories make things overcomplicated, especially for first-time cardholders. 

Features and rewards

Most student credit cards offer 1% cash back. The Discover it Student Chrome card bests that with 2% cash back on gas and dining, plus a generous cashback match at the end of the first year. The match effectively doubles your first year’s bonus rewards, so if you receive $75 in cashback rewards during the first 12 months, Discover will chip in an additional $75. We also like that the Chrome student credit card incentivizes good grades: You can earn a $20 statement credit for each school year you maintain a GPA of 3.0 or higher. 

Rates and fees 

Discover’s rates and fees are generally lower than competitors’. The APR charged on purchases ranges between 12.99 and 21.99%, and there’s an introductory six-month period with 0% APR. Students with the Discover it Student Chrome also don’t have to worry about a penalty APR, which some issuers will institute if a card holder misses a payment. There’s no late fee for the first late payment, but for the second instance the credit card company charges up to $40, which is comparable to other cards. 

At the moment, most study abroad programs have been put on hold. That noted, the Chrome student credit card has no foreign transaction fees — though Discover isn’t as widely accepted outside of the US as Mastercard and Visa.

Best for students without a credit history

  • Standard APR: 18.74% variable
  • Penalty APR: None
  • Late payment fee: Up to $25
  • Annual fee: $0
  • Cashback rewards: 1% on all purchases 
  • Foreign transaction fee: 0%
  • Standout feature: Low late payment fee
  • Eligibility requirements: No credit score required; no social security number required for international students 

Deserve positions itself as an alternative to the traditional banks and credit card issuers, and specializes in credit cards for students and first-timers. And the Deserve Edu student credit card checks many of the boxes: It offers 1% back on all spending, features a relatively low late payment fee and comes with a flat 18.74% APR. While it offers a lower reward rate than others, its relaxed eligibility requirements are well suited for students with a brief or nonexistent credit history or other potentially disqualifying limitation — like not having a social security number, if you’re an international student. 

Features and rewards

The Deserve Edu student credit card offers 1% cash back on all purchases, which can be redeemed for statement credits in increments of $25. Card holders also get one year free of Amazon Prime Student — worth around $40 — and up to $600 of credit toward cell phone protection coverage when you pay your monthly bill with it. 

Rates and fees

The 18.74% variable APR is relatively low for a student credit card, and it’s not tied to your credit score, so you know exactly what the APR is at the outset. Rather, the APR is “variable” because it’s tied to the “prime rate” — a benchmark interest rate used by lenders that changes over time. With most other cards, you won’t know the exact APR certain until you’ve been approved — and if you have a limited or nonexistent credit history it could be on the higher end of the range of what the issuer advertises. If you miss a payment, there’s no penalty APR — though you may be charged a late payment fee of $25. (Still, that’s about $15 less than the fee charged by most other student cards.) Deserve doesn’t charge any foreign transaction fees.

Best for students who plan to carry a balance

  • Standard APR: 14.99% variable
  • Penalty APR: None
  • Annual fee: $0
  • Late payment fee: Up to $39
  • Cashback rewards: 1% on all purchases; 4% cash back on Lyft until 2022
  • Foreign transaction fee: 3%
  • Standout features: Free, unlimited access to credit score; Earn a credit limit increase after making 5 monthly payments on time
  • Eligibility requirements: No cosigners, proof of income

The student version of one of our favorite cashback credit cards, the Chase Freedom Student credit card has a lot to offer. The 14.99% variable APR is one of the lowest available for student credit cards, and you get a $50 credit when you sign up, a $20 bonus every year and a credit limit increase after five on-time payments.

Features and rewards

Chase offers cardholders free and unlimited access to their credit score, which can be an important tool for those building credit from scratch. The credit limit increase is another nice feature as credit utilization is a primary factor in a credit score. Most credit experts recommend using less than 30% of your total credit available, so the higher the limit, the easier it is to keep your utilization low.

Its 1% cash back on all purchases is consistent with the category average and the 4% back on Lyft rides is nice (though less practical for many in the coronavirus era). The $50 sign-on bonus can be triggered by making a single purchase in the first three months so you need not worry about hitting a high spending threshold. And the $20 annual reward can be redeemed for five years — as long as your account remains in good standing. 

Rates and fees

Every cardholder gets the 14.99% variable APR — so you know what you’re signed up for at the outset. It’s best not to maintain a balance month-to-month, but if it happens once or twice, the interest will be lower than with other cards.

A few words of caution: This card’s late payment fee can run as high as $39 for a first late payment; most other student cards have a lower penalty or no penalty for first-time offenders; and if you’re planning on studying abroad, this card will subject you to a 3% foreign transaction fee. 

Best for students who have a cosigner

  • Standard APR: 14.99% to 22.99% variable
  • Penalty APR: Up to 29.99%
  • Late payment fee: Up to $40
  • Annual fee: $0
  • Cash back rewards: 1.5% on all purchases
  • Foreign transaction fee: 0%
  • Eligibility requirements: Allows cosigners

Bank of America is one of the few card issuers that allows cosigners, who can be a parent, guardian — or anyone with a good credit score who’s willing to share the legal liability. On the other hand, any late or missed payments or high outstanding balances will also negatively affect the cosigner’s score. 

Features and rewards

This student credit card is essentially the same as Bank of America’s Travel Rewards card, which means it offers higher risks and rewards than most other student cards. You get a higher cashback rate — 1.5% back on all purchases — but fewer of the relaxed requirements for credit novices. And points can be redeemed only as statement credits against travel purchases; so, unless 1.5% of your spending is on taxis, Uber or Lyft, flights, baggage fees, hotels, rental cars, buses, trains, amusement parks or campgrounds, this card’s rewards aren’t particularly valuable.

Bank of America will grant you 25,000 points — equivalent to $250 — when you sign up if you spend $1,000 during the first three months. That’s a higher threshold than you’ll find with other student cards, but also a higher reward. Bottom line: If you can time your credit card application with a large purchase, it’s worth it.

Rates and fees 

Bank of America offers an introductory 0% APR for the first year and no foreign transaction fees. That being said, this student credit card doesn’t mess around when it comes to penalties: The standard APR runs between 14.99% and 22.99% depending on your credit score — but if you’re late with a payment, you could be hit with the 29.99% penalty APR. That’s exorbitant — and it comes in addition to a $40 late payment fee. Students at risk of paying late should avoid this card at all costs.

How does a student credit card work?

Student credit cards offer those with limited or no credit a way to start building credit a credit history. They generally come with lower credit limits than typical credit cards and don’t charge annual fees. And they often have novice-friendly features, including late payment forgiveness, incremental credit limit increases over time and credit education resources. Reward rates may be lower than standard cashback and travel credit cards, however, making student credit cards a lower risk, lower reward financial tool.

Are secured credit cards a good option for first-time credit card holders?

Secured credit cards offer a way to build or repair bad credit — but they’re better suited for those who have bad credit or a nonexistent credit history. Secured credit cards also require an upfront security deposit in the amount of your credit limit; for $1,000 of credit, you have to give the bank $1,000. In effect, the bank is loaning your own money back to you — sometimes with an annual fee or high interest rate. If you don’t have another option, a secured credit card may make sense. But a secured card shouldn’t be the first choice for a credit newbie.

What do you need to qualify for a student credit card?

Most credit cards require an applicant to have a credit score of at least 650 and a substantial credit history. Student cards don’t. Still, you may need to demonstrate some financial responsibility — including a source of income, even from part-time work or deposits from your parents. The card issuer may also want to see information about your checking and savings accounts to get a sense of your spending habits and confirm that you’ll have sufficient funds to pay the minimum monthly payment. 

How do cashback rewards work?

For all the cards listed above, “cash back” refers to a statement credit that’s applied to your account to lower your balance. For the Bank of America Travel Rewards card, for example, you can only redeem rewards against travel purchases. But for most other cards, rewards can be applied toward a balance regardless of expense type.

Read moreThe best cashback credit cards

Cards we researched

  • CapitalOne Journey Student Rewards
  • Discover it Student Chrome 
  • Discover it Student Cash Back 
  • Deserve EDU Student
  • Bank of America Cash Rewards for Students
  • CapitalOne Secured Mastercard
  • Bank of America Travel Rewards for Students 
  • Citi Rewards + Student
  • OpenSky Secured Visa
  • BankAmericard for Students 
  • StateFarm Student Visa 
  • Wells Fargo Cash Back College 
  • Petal Visa 
  • Chase Freedom Student
  • CapitalOne Platinum
  • Discover it Secured
  • Chase Freedom Unlimited
  • Citi Double Cash Card
  • CapitalOne Quicksilver Cash

Disclaimer: The information included in this article, including program features, program fees and credits available through credit cards to apply to such programs, may change from time-to-time and are presented without warranty. When evaluating offers, please check the credit card provider’s website and review its terms and conditions for the most current offers and information. Opinions expressed here are author’s alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.

The comments on this article are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved, or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.

Read more: Best balance transfer credit cards of 2020

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Bad Credit

3 Reasons You May Be Denied a Bank Account

Published

on

Bank account application rejected? This might be why.

You have a steady job with a steady paycheck and you want to find a home for your money. What’s your next move? It’s simple. You apply for a bank account and wait for your account number and debit card to be issued.

But what if your bank account application is unexpectedly denied? Believe it or not, having the money to put into a bank account does not guarantee you’ll be given that option. If your bank account application is rejected, it could boil down to one of these reasons.

1. You have a history of being irresponsible with your bank accounts

Many banks use screening services like ChexSystems to get a sense of how responsible account applicants are. These systems are comparable to the credit bureaus that track your credit history. If there’s a red flag in your banking history — for example, writing bad checks or too many overdrafts — you could be denied a bank account.

2. Your credit has been frozen

Freezing your credit will prevent a criminal from opening a bank account in your name. But it will also prevent you from opening a new account. If you froze your credit because you were worried about fraud, you’ll need to undo it to open any sort of new account, whether it’s a bank account, credit card, or loan.

3. You have poor credit

You may be aware that a bad credit score could result in you getting denied a mortgage, personal loan, or credit card. But did you know that having bad credit could mean not qualifying for a bank account? Banks have a right to deny you an account for bad credit — even if you have enough money to fulfill their minimum deposit requirements.

What to do if you’re denied a bank account

You may be shocked to see that your bank account application is denied. If that happens, aim to find out why. If, for example, you’re told there’s negative activity on your banking history but that doesn’t sound right to you, investigate it to find out if there’s an error working against you.

If you’re denied a bank account because of your credit score, you can work on improving it. The most effective way to do so is to pay all of your incoming bills on time and knock out a chunk of existing credit card debt to lower your credit utilization ratio. Checking your credit reports for errors is important as well, because if one of them contains a mistake that’s hurting you, correcting it can help you get approved for a bank account.

Finally, if you’re denied a full-service bank account, you can see if you qualify for a second chance bank account. Some banks offer these pared down accounts that let you deposit and withdraw money — they just don’t have all the perks of standard checking accounts. Opening one is a good way to rebuild your banking reputation.

Being denied a bank account can be shocking. If it happens to you, find out why and aim to rectify the problem. There are so many great banks out there offering different benefits, and it’s a shame to not be able to take advantage of them.

Source link

Continue Reading

Bad Credit

Cheapest Car Insurance in Alaska 2021

Published

on

With fewer than 550,000 drivers in 2018 reports, Alaska has the third-fewest drivers in the country. The natural beauty of mountains, glaciers and waterways in America’s Last Frontier are gorgeous to behold but can quickly become treacherous in the wrong conditions. It’s critical that as an Alaska resident, you have the right kind of car insurance to protect you before you get behind the wheel.

The cheapest car insurance in Alaska

The average cost of car insurance in Alaska for a minimum coverage policy is $340, while a full-coverage policy costs $1,484 per year. Just like any state, there are some companies that are more affordable than others when it comes to the cheapest car insurance in Alaska. The five cheapest car insurance companies based on the average annual premium for minimum coverage are USAA, State Farm, Geico, Progressive and Allstate.

Car insurance companyAverage annual premium for minimum coverageAverage annual premium for full coverage
Allstate$461$2,692
Geico$272$1,224
Progressive$402$1,165
State Farm$271$1,115
USAA$263$1,092

Allstate

Allstate offers excellent options for coverage, including roadside coverage, sound system insurance and a personal umbrella policy. Although it scores only average for customer satisfaction, there is 24/7 claims service with a Claims Satisfaction Guarantee for extra peace of mind. There is an early signing discount when you renew early, plus other discounts for things like automatic withdrawal, early signing and full-pay.

Geico

Geico is an affordable option that is available in all 50 states. There is personal injury protection coverage, rideshare insurance and mechanical breakdown insurance, with the option for gap insurance for leased vehicles only. To help you save some extra money, there are a ton of discounts available, like military, federal employee, defensive driver and multiple vehicle. When it comes time to manage your policy, Geico helps with fantastic mobile tools to help you manage your policy.

Progressive

Progressive gives you plenty of ways to save extra money on your policy with excellent discounts like continuous insurance, good student, homeowner and online quote discounts. It also rewards safe drivers with discounts through its Snapshot® program. Coverage options are generous, as well, including roadside assistance, gap insurance, custom parts and equipment coverage and a deductible savings bank.

State Farm

State Farm is great for accessibility, giving you options for phone and agent support with excellent mobile tools. It holds an A++ (Superior) rating from AM Best for financial stability, so customers can feel secure in the claims process. Coverage is excellent, too, offering exclusive coverage options like emergency roadside assistance, rideshare insurance, sports car and classic car insurance. State Farm welcomes customers with a host of discounts for extra savings, like safety discounts for passive restraints and anti-theft technology, with a special Drive Safe & Save discount for safe drivers.

USAA

USAA is the best pick for cheap car insurance in Alaska for military members and their families. It has a strong car insurance program that offers its membership low rates and expansive coverage with plenty of discounts. It’s a company known for excellent customer service, consistently receiving top ratings for customer satisfaction. In addition to the option for personal injury protection (PIP), there are military-oriented discounts like savings for low mileage or when you garage your car on-base.

Affordable coverage for Alaska drivers

Alaska requires its drivers to carry a minimum amount of liability car insurance that includes the following coverage:

  • $50,000 bodily injury per person
  • $100,000 bodily injury per accident
  • $25,000 property damage
  • $50,000 uninsured/underinsured motorist bodily injury per person
  • $100,000 uninsured/underinsured motorist bodily injury per accident
  • $25,000 underinsured motorist property damage

According to the Insurance Information Institute, over 15% of Alaskan drivers do not have car insurance. If you were to have a collision with any one of these drivers, it could mean serious losses if you do not have the right car insurance to protect yourself. That’s why it is so important to carry at least the minimum amount of coverage required by law, if not full coverage.

How to get cheap car insurance in Alaska

There are several ways to save on your car insurance in Alaska:

  • Shop around: Every insurance company prices car insurance differently, so it pays to gather quotes from multiple car insurance providers in Alaska.
  • Compare providers: Compare the type of coverage offered, taking into consideration things like pricing, tools, financial strength and customer service.
  • Take advantage of discounts: From safe driver discounts to discounts specifically for your school or employer, there are many ways to save money on your car insurance. Ask your insurance provider about what kind of savings could lower the price of your auto insurance in Alaska.
  • Work on your credit score: The higher your credit score, the less risk you pose to insurance companies, so it pays to have good credit. There are some great options for car insurance for bad credit, but you are more likely to see additional savings when you have a good credit score to show.
  • Increase your deductible: One way to lower your payments each month is to increase your total deductible. This means that you will have to pay more upfront if you experience a loss, but it still will lower your payments each month, making it more affordable for you to have insurance coverage.

Frequently asked questions

What is the best car insurance in Alaska?

For the best car insurance in Alaska, we recommend coverage from The Hartford, State Farm, Allstate and Geico. The best company for you may vary, based on things like coverage, price and credit score, but these four are the best places to start in your search for the best car insurance in Alaska.

What is the average cost of car insurance in the U.S.?

The average cost of car insurance in the U.S. is $563 per year for minimum coverage and $1,738 annually for full coverage car insurance. This is significantly more expensive than the average cost of car insurance in Alaska, which runs $340 for a minimum coverage policy and $1,484 per year for a full coverage policy.

Is car insurance required in Alaska?

Alaska requires that Alaska drivers maintain a minimum amount of liability car insurance that includes $50,000 for bodily injury per person, $100,000 for bodily injury per accident and $25,000 for property damage. Some counties in Alaska do not require car insurance, but if you intend on driving, it’s always a good idea to purchase car insurance to protect yourself.

Methodology

Bankrate utilizes Quadrant Information Services to analyze rates for all ZIP codes and carriers in all 50 states and Washington, D.C. Quoted rates are based on a 40-year-old male and female driver with a cleaning driving record, good credit and the following full coverage limits:

  • $100,000 bodily injury liability per person
  • $300,000 bodily injury liability per accident
  • $50,000 property damage liability per accident
  • $100,000 uninsured motorist bodily injury per person
  • $300,000 uninsured motorist bodily injury per accident
  • $500 collision deductible
  • $500 comprehensive deductible

To determine minimum coverage limits, Bankrate used minimum coverages that meet each state’s requirements. Our sample drivers own a 2018 Honda Accord, commute five days a week and drive 12,000 miles annually.

These are sample rates and should be used for comparative purposes only. Your quotes may be different.

Source link

Continue Reading

Bad Credit

The Pitfalls of Buying Furniture With In-Store Financing

Published

on

Furnishing your home can be expensive, and many shoppers find it difficult to cover the cost of doing so. To make these purchases more affordable for the average shopper, many stores offer qualified customers interest-free furniture financing. You also have other options available to you that aren’t offered by stores, like credit cards and personal loans.

How in-store furniture financing works

Many large retail stores offer bad credit furniture financing through store-branded credit cards and “buy now, pay later” furniture installment plans.

It’s fairly common for furniture retailers to offer a store-branded credit card with deferred interest financing plans, where you don’t get charged interest if you pay off the purchase in full within a set number of months. For example, you may be able to purchase furniture on your card and pay 0% APR for six months or longer, depending on the financing plan. But you could be on the hook for the interest you didn’t pay during the financing period — a phenomenon known as deferred or retroactive interest. Further, your APR will jump to 20% to 25% or higher, making repayment more expensive moving forward.

Here are a few examples of store-branded credit cards and their special financing options:

6 furniture stores that offer financing
RetailerType of financingStandard purchase APRSpecial financing offer
Ashley Furniture HomeStoreCredit card29.99% VariableDeferred interest financing on qualifying purchases for six or more months.
Bob’s Discount FurnitureCredit card28.99% VariableDeferred interest financing on purchases of over $399 for six or 12 months.
IKEACredit card21.99% VariableZero percent interest for six, 12 or 24 months on purchases of $500 or more for the IKEA Projekt card.
Conn’s HomePlusCredit card29.99% VariableZero percent interest for 48 months on purchases of $3,999 and more.
Value City FurnitureCredit card29.99% VariableDeferred interest financing on qualifying purchases for six or 12 months. Zero percent interest financing for 36 months with 36 equal monthly payments.
WayfairCredit card26.99% VariableDeferred interest financing for six, 12, 18 or 24 months on orders of $200 or more.

Other furniture stores with financing options, including Wayfair, may offer point-of-sale loans through third-party companies like Affirm. These loans can come with a fixed APR of up to 30% with a short repayment term. This can be a good option if you prefer fixed payments, can repay the loan over the allotted term and qualify for an affordable APR.

Pros and cons of financing your furniture in-store

In-store furniture financing can be an affordable way to make your purchase — if you can pay off the debt on time. When it comes to store-branded credit cards, you’ll want to avoid deferred interest and the potentially high standard APR by paying off your debt during the special financing period. With point-of-sale loans, make sure the monthly payments and repayment term are feasible as missed payments can damage your credit.

Consider the following pros and cons of using in-store furniture financing before signing up for a new credit account or loan:

In-store financing: Pros and cons
ProsCons
  • May qualify for 0% APR for a limited time
  • Convenient application process at checkout
  • Opportunity to build credit
  • May have to pay deferred interest after the special financing offer expires
  • Potentially high APR and/or short repayment term
  • May need good credit to qualify

You may qualify for 0% APR, if you meet requirements

In-store financing could be a good deal if you pay off the money you borrow within the zero-interest financing period.

For someone who doesn’t have enough savings to cover the furniture, it might make more sense to take advantage of a deal like this instead of tapping into an emergency fund. However, you’ll want to make sure you pay off the total debt before your term ends to avoid retroactively accrued interest.

You can get new furniture right away

With furniture financing available at checkout, you can apply for credit or a loan to pay for the items that you’ve been eyeing, even if you don’t have the cash on hand to purchase them.

The trick here is to make purchases that you can afford to pay off in a short period. Special financing offers on store-branded credit cards may only last six or 12 months, sometimes longer depending on the size of your purchase. Loans like those offered by Affirm may offer loan terms based on your purchase amount, as well.

Oftentimes, furniture retailers will work with a financial institution that issues in-store credit cards. If these credit companies report on-time payments to one or more of the three credit bureaus, you may find your credit score steadily increasing over time. Check with retailers before you apply for a card to see whether or not you can take advantage of this opportunity.

You may have to pay deferred interest

Store-branded credit cards with 0% APR special financing offers come with deferred interest. That means interest accumulates on your principal during the financing period, starting from your original date of purchase. If you own a credit card with a deferred interest offer and don’t repay your entire principal amount before the financing period ends, you may find yourself owing hundreds of dollars or more in these retroactive interest fees.

Store credit cards have high standard purchase APRs

On top of owing deferred interest going back to the beginning of the date of purchase, the credit card company will continue to charge interest until you repay the full amount owed.

Remember that in-store credit cards carry high interest rates — higher than a typical credit card’s interest — so once the regular APR kicks in and you’re hit with all the deferred interest charges, the charges can rack up rather quickly.

May need good credit to qualify

People with bad credit or no credit might not qualify for furniture financing, since many stores require that you sign up for their partner bank’s credit card in order to do so.

But here’s the thing: Even the act of applying for new credit can temporarily ding your credit score. For that reason, make sure to ask the store if it offers prequalification, an approach that assesses your creditworthiness without conducting a hard credit pull. You can get a good idea of whether you’ll get approved for financing, without hurting your credit score in the process.

Alternatives to in-store financing

Budget, save up cash and pay upfront

If you want to buy furniture, you’ll end up paying for it one way or another. So instead of getting a furniture loan, you might consider saving up the cash to pay for it.

This strategy will keep you from the risk of having to pay high interest retroactively if you can’t repay the loan within the promotional period. You’ll also own your furniture sooner and pay less for it in the process.

Go to a rent-to-own furniture retailer

Rent-to-own furniture stores offer affordable installment payment plans for those who need it. With a rent-to-own plan, you can walk in and buy the furniture you need immediately, and gradually pay for ownership over a predetermined number of weeks or months.

Rent-to-own furniture retailers often don’t require credit checks, and you have the freedom to end your contract at any time. However, rent-to-own payment plans can be much more expensive than if you bought the furniture on credit or cash outright.

If you have other options available to you, you may want to consider them instead as you’ll likely save more money with those choices. However, rent-to-own plans may be a good alternative for those who need furniture immediately but don’t have the cash upfront, or for those with bad or no credit.

Use a credit card with a 0% APR promotional offer

If you’re able to land a credit card with a 0% introductory APR, chances are its terms will be better than the ones a furniture retailer can offer you. Even if you only qualify for a regular credit card, they’ll usually still carry a lower interest rate than retail store cards, which can save you a bundle if you’re left making furniture monthly payments after the promo period ends.

If you’ve got a credit card offer with a 0% percent introductory rate on purchases, compare its regular interest rate with that of the furniture store credit card. Make sure to choose the lower-cost option, in case you cannot pay off the balance by the time the promotional period is up.

You could use a personal loan to finance furniture purchases. This option comes with a set repayment schedule, fixed interest rate and relatively quick approval process. Depending on the lender, you could borrow as little as $1,000 or as much as $50,000 or more.

However, lenders will conduct a credit check on all applicants so you’ll want to have good credit or better to qualify. The best repayment terms are reserved for those with excellent credit, although those with a good credit score can still land attractive offers.

Unlike credit cards, though, you won’t find lenders offering 0% interest on personal loans so you’ll pay more than you would if you paid with cash upfront. To save as much money as possible, carefully weigh the offers you receive and calculate your savings with each before you make your decision.

Compare multiple lenders at once with our comparison tool below:

APR

As low as 2.49%

Credit Req.

Minimum 500 FICO

Origination Fee

Varies

LendingTree is not a lender. LendingTree is unique in that you may be able to compare up to five personal loan offers within minutes. Everything is done online and you may be pre-qualified by lenders without impacting your credit score. Terms Apply. NMLS #1136.


As of 17-May-19, LendingTree Personal Loan consumers were seeing match rates as low as 2.49% (2.49% APR) on a $20,000 loan amount for a term of three (3) years. Rates and APRs were based on a self-identified credit score of 700 or higher, zero down payment, origination fees of $0 to $100 (depending on loan amount and term selected). Terms Apply. NMLS #1136

Information contained on this page is provided by an independent third-party content provider. Frankly and this Site make no warranties or representations in connection therewith. If you are affiliated with this page and would like it removed please contact pressreleases@franklymedia.com

Source link

Continue Reading

Trending