Credit cards vs payday loans

Choosing the better loan option - Credit Cards Vs Payday Loans

06:52 25 January 2014

When in a financial bind, you may have the option to use your credit card or run to the nearest payday loan company.  Determining which of the two options will be less excruciating on the budget could be tough.  The tips below could help you make the right choice.

• Payment Terms

Payday loans are so easy to avail but the repayment terms are no laughing matter.  Generally, you have to pay the loan within 28 days and if you go a day beyond the payment terms, the additional charges can bring you further into bigger debts.  The reason for this is because charges are computed for every day of the loan until it gets fully paid.  Credit cards on the other hand, give you up to 56 days to settle your debt without interest if the amount is paid in full.

Credit cards also allow flexible payment terms and let you pay a minimum amount.  However, if you take this option, there will be interest charges, but definitely lower than what payday loan charges.  If you cannot make the full payment, pay the minimum amount and strive to settle the balance the following month.

• Long-term advantages of payday loans

Payday loan companies submit reports to credit agencies of repaid loans.  This could have a good bearing on your credit history if you paid your loan on time.  On the other hand, if your name always appear as a regular payday loan borrower, this will not also look good for mortgage lenders.  So if you can help it, never avail of payday loans if you plan to buy a house soon.

• Credit Card Provides Consumer Protection

Credit card purchases beyond £100 are covered by the Consumer Act protection.  It will be advantageous to use the credit card for big purchases.  Thus, you will benefit from this in the event that the establishment you bought from closed shop, you can still refund your money. 

 

Flights booked using the credit card will pay trip cancellations or lost luggage.  The payday loan does not provide any consumer protection so this is one major setback that you have to consider.