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Disadvantages of an Instant Credit Card
3 May 2018

What Are the Disadvantages of an Instant Credit Card?

If you find yourself in a bind and need money to pay for something right away, you might be tempted to request an instant credit card. Instant credit cards can sound like a godsend when you’re desperately in need of a car repair or looking to take care of another big expense.

But just because you can get a credit card instantly doesn’t mean you should do it. When you receive it, you will be able to get the money you need. But in the long run, it could hurt both you and your credit and turn into more of a hassle than you thought it would be.

If you’re currently thinking about requesting an instant credit card, you should think again. Take a look at the disadvantages that will come along with getting one below.

An Instant Credit Card Will Typically Come From a Third-Party Lender

When you request a credit card instantly, you usually don’t do it through a trusted bank or even the store or shop at which you’re requesting it. More often than not, these types of credit cards are handed out by third-party lenders.

The problem with this is that you probably won’t know anything about that particular lender or what they’re all about. Worse, it might be difficult for you to find out much about them later.

That means you will be borrowing a substantial amount of money from a lender that could potentially have a bad reputation in the business. And you’re probably only doing it because you feel like you’re being put on the spot.

Any time you request a credit card or a line of credit, you should always do your research and make sure you know which company you’re borrowing from. You should also look into that company to make sure they’re a lender you can trust with your financial future.

Otherwise, you might end up paying the price for it later. It won’t be worth it in the end when you borrow money from a company that has unfair practices in place.

You Probably Won’t Understand the Terms Attached to It

Studies have shown that most Americans don’t spend much time reading the terms that come attached to their credit cards. In fact, only 25 percent of people say that they read the terms “regularly.” The rest of the U.S. population only reads them occasionally, if at all.

We would guess that percentage would drop significantly when it comes to those who request an instant credit card. Those who request one probably don’t get around to reading the terms that come attached to it once they’re approved.

As you might imagine, this can prove to be problematic. If you don’t read the terms of a credit card, you could agree to a ridiculously high APR that will make it almost impossible for you to pay down your debt. You could also agree to pay deferred interest on your card after an introductory period.

You can avoid doing these things by doing whatever you can to get to the bottom of the terms attached to a credit card before you add it to your wallet.

You Also Won’t Have Time to Make an Informed Decision

Assuming ownership of a credit card is a big deal–a much bigger deal than some lenders make it out to be. As such, you should spend at least a few days thinking about if you’re ready to assume the responsibility that comes along with having one.

An instant credit card makes it impossible for you to sit down and make an informed decision. Often times, people will request one when they’re standing at a checkout counter or speaking with a receptionist at a desk.

This is not the best way to weigh your options as far as requesting a credit card goes. You want to feel like you’re entering into a partnership with a lender and ready to commit to paying down your debt.

When you don’t have the time to consider all your other options and you make a hasty and emotional decision, it can impact your finances for months and even years to come. Are you really ready to live with that impact?

Your Credit Score Could Take a Hit

When requesting an instant credit card, most people don’t think about the hit their credit score will take because of it. But your credit score will likely take a hit in the short term and could also go down in the long term because of it.

Most of the time, your credit score will dip just a bit when you request a credit card. It’s not uncommon to see it go down by 5 points or more due to the inquiry made on behalf of the credit card company.

But that’s just the beginning. Your score might go down more depending on what kind of card you applied for. For example, an instant store credit card can lower your credit score by about 20 points.

You will also, of course, have to deal with the damage that any debt you rack up because of the card could do to your credit score. If you’re forced to max out the card right away, you’ll have to deal with more than just the terms attached to the card. You’ll also have to deal with having a lower credit score because of it.

There are some people who can afford to lose a few points on their credit score without worrying about it. But there are also many people who simply cannot afford to sustain any more damage to their credit report.

People tend to overlook the effect an instant credit card can have on their credit report. But before you request one, you should well aware of what it could potentially do to yours.

You Won’t Have a Plan in Place for Paying Down Your Debt

If you were to request a loan from a bank today, you probably wouldn’t do it without first sitting down and figuring out how you were going to pay that loan back. You would probably ask yourself questions like:

  • How much of this debt can I afford to pay down every month?
  • How many months do I want to take to pay down the debt?
  • Do I have a plan in case I can’t make a payment one month?

You would be, in a word, prepared. You would make sure that you were ready to commit to paying down your debt once you took it on.

You probably won’t make this same effort when you request an instant credit card. While you might think you’re in a position to pay down the debt you’re taking on, the truth is that you’re probably just wishfully thinking that the debt will take care of itself.

You should treat any credit card request just like you would treat any other type of loan request. You want to have a clear-cut plan in place, and you want to be able to stick to it.

An instant credit card could conceivably throw your finances out of whack if you aren’t careful, especially if it comes with an APR that is too high for you to manage. It’s why getting one comes back to bite so many people who request them.

You’ll Regret Not Considering Other Options Later

Before you sign on the dotted line and agree to the terms of an instant credit card, ask yourself this: “Is this really my only option?”

There are a lot of people who request an instant credit card because they mistakenly believe it’s the only way to get themselves out of a jam. Whether they’re paying off a car repair bill with it or using it to cover another unexpected cost, they jump at the opportunity because they’re emotional.

When you do this, you’re pretty much guaranteeing that you will regret your decision later. Rather than getting a credit card with unfavorable terms, you could:

  • Put off your car repair until later and use public transportation instead
  • Ask a family member or friend for a small loan and agree to a contract saying you’ll pay them back
  • Find a lender that can offer you a loan you can actually afford

The biggest disadvantage of an instant credit card of all might be that it blinds you to all the other options you have. Those options could very well keep you out of financial trouble more effectively if you open yourself up to them rather than making an impulsive decision.

Find a Better Solution Than an Instant Credit Card

In the end, a credit card might turn out to be your best option. But instead of going the instant credit card route, you should see what other credit cards are available to you. You should also consider installment loans and the other options you have to pay down a big bill or a large amount of debt.

Check out your loan options and contact us with any questions you might have about them.