Credit card companies are offering financial options

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Some credit card companies now offer options such as payment plans and flexible loans to customers who want to pay for larger purchases over time, according to the New York Times. They can take different forms. Here are some examples that the Times has highlighted.

Citi offers payment plans for large purchases as well as flexible loans that allow some cardholders to borrow with a credit not used on their card. Both options are fixed, although for flexible loans the interest rate is limited to the purchase interest rate of the card.Chase has a new payment plan called My Chase Plan, which allows cardholders to pay past purchases of $500 or more over a longer period of time for a monthly fee. The lender also has a flexible lending option which it calls My Chase Loan. It allows some users to borrow up used portions of their credit line at an interest rate that competes with regular APR purchases on the account.While these new services can be useful if you're looking for money quickly, you'll want to know the terms of the offer and the additional fees you may have to pay before committing.

Why do card companies offer payment options?

According to the New York Times, credit card companies that offer these new options say their payment plans and credit loans can help customers better manage access to cash and make it easier to borrow money when needed.

Why should you be vigilant when using these products?
If you need to repair your car urgently or have to pay an unscheduled medical bill, it can be difficult to add costs to your budget, especially if you don't have an emergency fund.
But while signing up for a flexible payment plan or credit card loan you already have can be tempting, think about whether one of these new options is really the best way to do it in your situation. For example, you may want to consider something like a personal loan, as it may have more competitive interest rates.

If you choose any of the new financial options offered by credit cards, there are some potential pitfalls to consider.
Higher interest rates - Credit cards often have higher interest rates than other forms of credit, so plans to pay by credit card or loan may not be particularly cost-effective. Plus, if you miss a payment, your interest rate may still go higher.Potential Impact on Credit - Lending to an unused portion of your card's credit line will increase your credit usage rate (the percentage of credit you currently use). And if your rate is already high, using more credit limits can have a negative effect on your credit. That's because this rate can be an important factor in calculating your credit score.