We all need a little extra cash to get us through difficult financial times and unless we have savings to dip into or friends and family who are in a position to help, many of us have to make the choice of payday loans vs credit cards. There’s no right answer to this dilemma but we can help explain some of the pros and cons in order to help you make an informed decision when you’re faced with this difficult choice.
Payday loans often get a bad press but they do have their advantages. Used wisely and as intended, a payday loan can be a convenient way to borrow a small amount of cash in the short term to cover a financial emergency. Payday loans vs credit cards give the borrower a fixed amount to repay on a pre-arranged date. This enables the borrower to take a more disciplined approach to debt as it forces them to budget for the repayment date as well as the month ahead. This is a good habit to cultivate for on‑going financial health. Credit cards, on the other hand, with no fixed repayment schedule, can sometimes lead to a temptation to continue spending and never fully pay off the amount owed.
There are, of course, some circumstances where credit cards may be a better option for some people. For example, it’s clearly preferable to use a credit card if you are able to take advantage of 0% interest rate offers for a set period, as this allows you to borrow at no cost. It is crucial though to keep a close eye on when these introductory offers expire and manage your debt in such a way that it is paid off before standard interest rates come into force. Interest on credit cards can commonly be 20% or more on amounts that are not fully settled each month, so it can very quickly become an expensive way of borrowing which can lead to a spiral of debt if you only make the minimum payment every month.
When you need to make a decision on payday loans vs credit cards, you should also consider what you will be using the money for. The payment protection which a credit card gives you, by law, provides a form of insurance if anything should go wrong with your purchases or the supplier goes out of business. This can be invaluable if you need the money to pay for a holiday, for example, as it will protect you in the event that the tour operator or airline goes bust.
When you’re contemplating taking on any sort of credit, it’s important to weigh up the pros and cons carefully to make sure that you select the product which best suits your circumstances and ability to repay. Payday loans vs credit cards can be a contentious issue but, when managed sensibly, both can provide a viable solution to temporary financial difficulties.