Credit card is no substitute to personal loan

There are about 12 million credit cards in the wallet of Australians having an outstanding debt of more than $40 billion. Credit card companies charge higher interest rate in comparison to rate applicable on a personal loan. Yet, credit card is an immensely popular device, seen by many as the most convenient option to withdraw large amount of cash in emergency.

The greatest advantage of credit card is the flexibility of its use, and this is the reason why people prefer using it most of the time when they are in need of urgent cash or they have to make some big purchase. However, because of the high interest rate charged by the credit card companies, there is always the danger of falling into the vicious circle of debt trap. You need to spend judiciously with your credit card – if you don’t know how to stay within budget, you better stay away from these cards.

When you are selecting a credit card, you have to consider a few things, such as interest rate charged on cash advances and outstanding balances in addition to the interest free period. If you are making your payments regularly every month and not keeping any outstanding balance on the card, you should naturally choose one that gives you longest interest free period. However, if you are not paying the entire outstanding balance at the end of every month, you will be better off choosing a card that charges lower interest rate even if it gives low interest free period.

Personal loan offers a number of advantages in comparison to credit cards. First of all, it can help you stretch your repayment schedule over a long period without paying too much on interest charges. At times, they can be used to consolidate your credit card loans at a much cheaper interest rate, if you are thinking of cutting your credit card dues. Sometimes, there are some merchant fees on big purchases and you end up paying a lot more than the price applicable for cash purchase, and in those situations, you may think of taking a personal loan and paying by cash rather than paying through credit card.  This way you are also discouraged from impulse buying, which is quite a big problem for people who are carrying credit card in their wallet that gives them a false confidence of having enough surplus cash.