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Is It Better to Have a Credit Card or a Loan?

Is It Better to Have a Credit Card or a Loan?

A Loan or a Credit Card?

Unexpected bills can come in many different shapes and sizes; a small vet bill to get your pet some much-needed treatment, a back-billed tax statement or even a costly car repair to keep yourself on the road. They are unpredictable and unwarranted, and often leave us in less than ideal situations – in fact, many of us simply don’t have the funds available when we need them.

When these types of costs hit, they must be taken care of immediately to avoid racking up additional charges or late payment fees. This is why so many people choose to take out loans, credit cards or other types of advances. The thing is, there’s a large selection out there, and sometimes it’s difficult to know exactly what product might be best for you.

It helps to know how some financial products can be more beneficial than others in certain situations. Whenever you make any financial decision, you should consider all options before making an informed selection. You want to make sure here that you save money in the long run without incurring any additional fees.

This article will outline the pros and cons on credit cards and the most commonly use unsecured loans. Here’s some quick comparisons to consider on both before we dive into the details:

Credit Cards: Short Term/Payday Loans:
Rolling payment schedules    Various fixed payment schedules to suit
Hard to obtain with bad credit Multiple bad credit options available
Great for smaller purchases Good for emergencies  
Cost can depend on how you use it Cost is clear from the outset
Convenient where cash isn’t concerned Can use for cash or online payments
Interest is on the balance you have The interest is on the whole loan amount

Credit Cards

One of the most common forms of credit comes in the shape of a small, colourful plastic rectangle. Most Brits have their own credit card or are named as a card holder on someone else’s account, usually due to opportune marketing techniques utilised both online and through the post.

Credit cards aren’t always issued by the bank, they can also be in the form of a store card. Anyone that uses them basically builds up a bank of ‘points’ redeemable for in store discounts. Store cards can be genuinely helpful, allowing users to save a significant amount of money. However, on the flipside though, they can also make it easy for the user to fall into thousands of pounds worth of debt.

The main appeal of a credit card is that it can be used anywhere, at any time. There are usually no restrictions on what you can purchase, provided you maintain your card within the assigned credit limit and make (at the very least) your minimum payment by the due date every month.

Credit cards can be a good way to build up a credit score, as they are often easy to obtain via a ‘pre-selection’ process. Users should however – be aware that this can be a predatory form of marketing, it’s essentially designed to make the company money.

Credit card companies make a lot of money by charging you interest on your payments. They anticipate that an average user will buy something large and pay it off in installments, allowing the lender to charge the agreed amount of interest every month. The interest rate does vary from lender to lender, so it’s essential that you understand exactly what your credit card fees are and how they work.

two signs showing the word choice

Pros and Cons of Credit Cards and Loans –

One great reason to use a credit card, is that purchases will generally only start to accrue interest after your statement due date each month. Provided you pay your full credit card balance by the statement date every single month, the interest you pay will be minimal to none, making it a good tool to use, if you know you can quickly clear the balance that is.


  • Can be used anywhere
  • Great way to build a credit score
  • Can be cleared and reused at any time
  • Balance transfer options


  • Can charge late payment fees
  • Interest rates are normally high
  • Easy to overspend when you know the money is available
  • Credit limits can often be ‘too’ high
  • Card applications can take a while to process
  • You are able to increase borrowing after spending – leading to larger debt
  • Pretty easy to fall into a debt trap

A Payday Loan

Payday loans are also an incredibly popular type of lending, advertised as being a type of short term loan to help out with unexpected costs. They usually require minimal credit checks, making them a great, easily accessible form of credit.

Payday loans are typically credited to your account within very short timescales. For instance, if you apply through LoanBird, you may even have access to the funds in as soon as 15 minutes! They can be a widely varied amount, suitable for a wide range of applications, though they should be paid off in full within a month.

Whilst payday loans can be incredibly useful, they usually have much higher interest rates than other types of lending. This is because they are short-term, and as such, must be cleared in a timely manner. Failure to repay a payday loan by the due date can incur large fees – you should never take one out unless you know that you can clear it in full by your next paycheck.


  • Easy application process
  • Quick payments
  • Great for emergencies
  • Most applications run on soft credit checks


  • Normally high interest rates
  • People can fall into a rolling cycle of using them
  • Can be costly

a man on his iPad checking to use a loan or credit card

Short Term Loans and Bad Credit

Low interest loans don’t exist for those of us with a less than perfect credit score, which is where a short term bad credit loan can come in handy. It’s a higher interest form of credit that can be quickly granted without the need for an in-depth credit check. Lenders take affordability into consideration over your credit score, and they’re there for you if you aren’t eligible for other forms of borrowing.

If you’re looking to use a bad credit loan – it can comfortably bridge the gaps between needing money instantly while having a low credit score.


  • Easy application
  • A lot of lenders available
  • Great for people with below average credit scores


  • High interest rate
  • May include fees
  • Can be expensive upon repaying

Obviously you should thoroughly look into every possibility before you take out any form of credit, but, hopefully this has helped to show you the benefits of the most common lending options. It’s important to note that this is not intended to be advice on what type of loan/credit you should take out – just a guideline on what options are available.

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