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J.G. Wentworth Blog

Structured Settlement Funding Versus Credit Cards

Hi everyone.  J.G. Wentworth here.

When you need money, there are several options.  Some of these include getting a bank loan, getting money from friends and family or selling some of your investments, to name a few.  In my next few blog entries I’ll discuss the positives and negatives of different options, and ultimately compare them to selling your structured settlement payments.

Since credit cards are everywhere and almost anybody can get one, I’ll start with them.

Positives: 

  • Good for a small amount of money, such as a couple of thousand dollars.
  • Credit cards are quick.  You can usually get access to cash within a short period of time.
  • Credit card balances can be kept current with very small monthly payments.

Negatives:

  • Credit card interest rates in excess of 20% are not uncommon.  Late payment fees can be even more significant.  For instance if you are charged $35 for a $1,000 payment that arrives one day late, converting that figure to an interest rate for what is in effect a one day loan equates to an annual interest rate of more than 1,200%.  If you are one day late paying off a $50 dollar balance and are charged $35, the effective interest rate is more than 25,000% .
  • Credit card agreements are complex and can contain several hidden fees. For instance, the use of average daily balances means you could be charged interest even during a month when you never used the card. Moreover, even if you read and understand the agreement, they are changed frequently.  Committing to read your credit card agreements as they change requires a significant amount of time.
  • In order to get a credit card, you must give up potentially sensitive personal information to qualify and get the card.  In addition, the credit card company will request a credit report.  The number of credit report requests in any given year has a negative impact on your credit score.
  • If you make only the minimum monthly payment, it may take years to pay off the balance Your total interest paid could exceed the cost of what you purchased.

Compared to Selling Structured Settlement Payments

If you need more than $10,000, selling structured settlement payments could be better than getting cash from credit card companies.  Here’s why:

When you sell structured settlement payments there are no monthly payments to make.

  • Currently, the discount rates on the sale of structured settlement payments are often lower than most credit card interest rates.
  • When you sell structured settlement payments, you do not create additional debt that you must later pay off.

These are compelling benefits but must be balanced against the fact that selling payments requires you to go to court and generally takes longer and is more difficult than getting cash from a credit card.  Still for larger amounts of money, it may be the best way to go for many folks.