What’s Better for Me, Credit Card or Personal Loan?

Man being chased by a monster credit card.
“There is a time and a place for both personal loans and credit cards.”
How many times have we fallen into the trap of simply saying, “Chuck it on the card!” With various products being shown to us every time we turn the corner or even log in online, we are often finding ourselves reaching for money that we don’t currently have. Whether it be for that unexpected dental bill or even that new kitchen you promised your wife last summer. We can sometimes forget that we need to pay the money back as we are too busy distracted by the joy of our recent purchase. So really before making such decisions, we need to be aware of the differences between the two significant options out there, credit cards or personal loans. But don’t you worry, because here today we will cover this difference so that you know exactly what you’re getting in to.

What is a credit card?

Firstly credit cards work by giving you a set amount of credit that you can borrow from at any time. Ideal for short-term debt, a credit card allows you to borrow any amount of money, as long as you remain under your credit limit. Flexible and quick, a credit card can work wonders in allowing you to make that quick purchase or to buy those nice shoes that you saw while scrolling through Facebook.

What is a personal loan?

A personal loan, on the other hand, is not as fast paced and as exciting as a credit card but it works as a more structured and stable form of borrowing money. To get a personal loan, you must apply with the likes of your bank or credit union by stating a set amount to which you would like to borrow. This amount is processed, and your loan repayment will be determined and spaced out evenly over a fixed period. There are good reasons why you should consider getting a personal loan, before taking the plunge into borrowing money. With a personal loan you have a final “paid off date,” but with a credit card, you don’t, making it harder to pay off your debt.

Difference in rates

Personal loans generally have lower interest rates than credit cards, meaning you will be saving money. Personal loans provide an interest rate, based on your credit score and they factor the interest into your monthly loan repayment so that you are aware of the amount and also the total amount of loan repayments you will have. Credit cards, however, generally offer higher rates than personal loans, and they work on a revolving credit system. This means that the monthly amount differs each month based on the average amount of credit owing. With this rate being higher than personal loans, people can sometimes find themselves with unexpected bills at the end of the month as they failed to repay their borrowed credit on time, so they end up having to begin the process again the following month.

Difference in repayment

The repayment systems are also different. Personal loans work on a fixed term deal ranging from 2 – 5 years on average with a set manageable amount for the borrower to pay. Credit Cards work differently, due to their revolving credit system. Credit cards offer a sweet, minimal payment option so that you don’t receive any penalties or fall behind in payments. But with the high credit rates that are offered, individuals could find themselves paying off the borrowed amount for years or even indefinitely! As more and more interest gets piled on each month.

Reasons for both

There is, however, a time and a place for both credit cards and personal loans. Personal loans work great as a stable way to borrow money. It’s safe and affordable and provides a means for people to make those large purchases for things such as travel, new kids, home renovation or even Christmas. It doesn’t have any tricks and allows you to carry on with life smoothly as it gives you time to get everything else under control. Credit cards work great for those who can resist the temptations of sudden purchases and realise that you can’t treat available credit as available money. You should use your card if you know you will be able to pay the amount off within the month so that you don’t have to receive the unexpected blast of the interest, hitting your bank account at the end of the month.


Think before you go ahead and say the fatal words of, “chuck it on the card” and look at your other options. Personal loans could, in the long run, be the more stable and cheaper option for you. It just depends on the purchase and your current financial situation. For more information about personal loans, contact your local Credit Union or visit our website If you wish to read other blogs similar to this, you can check out the following: