Banks offer loans, credit limit hikes to Sandy victims

NEW YORK - In the wake of Superstorm Sandy, banks are offering short-term loans and emergency credit limit increases to many East Coast residents. But before jumping on one of these offers, make sure you know what you're getting into.

Citi, Wells Fargo, Bank of America, Chase and American Express have been sending out emails and posting alerts on their websites, notifying credit card customers that they may qualify for special credit offers if they were impacted by the storm. And in certain cases, banks are being a little more lenient with their lending standards.

Citi is offering emergency credit line increases to its customers. If a Citi customer isn't initially approved under the standard screening process, the bank will re-evaluate their account history to take into consideration "storm-related consequences that may be out of the customer's control," a Citi spokeswoman said. And it will become the customer's new credit limit going forward.

Bank of America customers will need to be creditworthy to qualify for a credit line hike, but each case will be determined on an individual basis, taking into consideration the storm's impact. The new limit will also become permanent.

Meanwhile, Chase said some customers in affected areas can get credit line extensions even if they wouldn't normally qualify, but the limit would revert to its previous level once they recovered from the storm.

Taking advantage of a credit limit increase isn't a bad idea as long as you have a low interest rate and no cheaper options, said Odysseas Papadimitriou, CEO of credit card comparison site CardHub.com. But if your rate is high, the interest can really pile up. Instead, it may make better sense to apply for a new card with a promotional offer like a 0 percent interest rate for a certain period of time -- which are common heading into the holidays.

In addition to credit line increases, Wells Fargo is offering short-term loans to its customers. Its Direct Deposit Advance is advertised as a way to cover emergency expenses and costs $7.50 for every $100 borrowed.

However, short-term loans are rarely a good idea, said Papadimitriou. Likened to "payday loans" by consumer groups, they carry steep fees that borrowers often can't afford to pay back by the time the loan is due -- a date that typically coincides with their next paycheck.

When calculated over the average term of 10 days, APRs on these short-term loans typically run in the triple digits. The fee on Wells Fargo's advance is lower than most, but its APR would still amount to a high 270 percent for a 10-day loan period.

"Even (getting a credit limit increase on) the highest credit card APR out there -- in the 40 percent or 50 percent range -- is going to be more attractive than a payday-type loan," said CardRatings.com founder Curtis Arnold.

While both options may sound tempting if your house or car has just been flooded and you can barely pay the bills, remember to check with your insurance company to figure out what is covered first. And, of course, tap into any funds available from national or state disaster relief agencies, said Papadimitriou.

The Federal Emergency Management Agency (known as FEMA), for example, will often cover rental payments for temporary housing when a storm victim's home isn't available. Grants are also available for home repairs and to replace household items that were destroyed. Other disaster-related expenses like medical, dental, funeral or transportation services, may also be covered by FEMA. To apply for assistance, go to DisasterAssistance.gov. You can apply by smartphone at m.fema.gov or call 800-621-3362.

Meanwhile, the Small Business Administration offers disaster loans of up to $200,000 with interest rates as low as 1.7 percent to homeowners needing to repair or replace homes damaged or destroyed by the storm. Loans up to $40,000 are available for homeowners or renters to repair or replace personal property that was damaged.

Many nonprofits -- like the American Red Cross -- are also offering free assistance to storm victims, including meals, shelter, and transportation.