Need to borrow money? Not sure if your best option is a payday loan or credit card? Quick Loans Express discusses the advantages and disadvantages of both to help you make an informed decision.

Story Highlights:

  • Payday loans or credit cards – which one?
  • Credit Card – hidden fees; making cash payments; merchant charges; interest rates
  • Payday loans – affordability checks; cash payments; fees told up front
  • Credit Card vs Payday Loans? You Choose!

Payday Loan or Credit Card?

Payday loans

  • Lenders will only give you a loan if you can afford it, reducing your chances of debt
  • Same day funding, if approved
  • All fees are upfront
  • High acceptance rates for all credit scores
  • On time payments can help to build up your credit rating
  • Payday loans can be expensive
  • Sometimes lenders can be misleading

Credit cards

  • On time payments can help to build up your credit rating
  • You can make a purchase even if you don’t have enough funds at the time
  • Can be protected from fraud or theft
  • Hidden fees- for example, charges for withdrawing cash
  • Late fees and high interest for late payments which can lead you into a spiral of debt
  • You can easily go over your budget

Quick Loans Express explores all you need to know about credit cards vs pay day loans to help you make the best decision.

Everyone could use help making ends meet at one time or another. Whether it is an emergency expense or to finance a holiday, you need to borrow credit. Should you go for a payday loan or credit card?

In some cases, a payday loan can be the better option. All the fees up front and your lenders ensure that you will borrow responsibly. Read on for more guidance on whether you should take out a payday loan or credit card.

Payday Loan or Credit Card – Which One?

In an ideal situation, your income completely covers all your expenditure, and you do not need to take credit. If you can schedule your income to come in time to pay for your expenses, you should feel incredibly blessed.

However, most people do need to take out credit at some point in their lives. Sometimes you’ll need credit to cover an emergency expense that can’t wait. Let’s imagine your car brakes down, and the garage says an expensive piece needs replacing. You rely on your car to commute to work, take your kids to school, and do your grocery shopping. Can you really wait three weeks until the end of the month to pay the garage?

If you can’t avoid to wait, you’ll need to weigh your credit options and choose the one that works best for you. Should you go for a short term loan or credit card?

The Ins and Outs of Credit Cards

Hidden Fees

Every credit card comes with fees – you might just not know about all the charges up front. Many people are surprised to discover a huge bill after taking out cash with their credit card. If you read through all the fine print on your credit card contract, you might find a small section that briefly mentions a fee for withdrawing cash. However, your credit card company didn’t warn you about that before giving you the credit card. They leave it up to you to read through pages of fine print – or as a nasty surprise for you after you withdrew the cash.

Making cash payments:

Taking out cash with a credit card will surprise you with extra charges. However, when you take out a payday loan, you’ll receive money instantly in your bank account, and you can withdraw it in cash with your ATM card at no extra charge. If you need the credit to make a cash payment, same day loans are probably your best bet.

Merchant charges

When you pay with a credit card, you might have a surcharge added to your bill. This is an extra charge that a merchant tacks on to your total so he doesn’t have to pay the transaction fee for swiping your credit card. Consequently, he passes this fee onto you. Are you sure you want to pay an extra pound just for the privilege of swiping your card?

The FCA plans to ban those fees soon as they are unfair to the customer. Keep in mind though, that after Brexit, the ban will likely only be effective if you’re shopping with a UK merchant as opposed to one overseas. You may be able to reclaim some unfair credit card charges, but this will be decided on a case by case basis, and is not guaranteed.

Credit Card Interest Rates

If you are unable to pay off the minimum payment on the balance at the end of the month, your credit card provider will increase the interest rate. Even when you do manage to make the minimum monthly payments, you’ll still be paying interest on the balance. Since you only have to pay the minimum amount, you can keep amassing a greater and greater loan, getting yourself into really hot water. If you are already struggling with your finances, and you’re choosing between a payday loan or credit card, it’s important to know that credit cards can make it very difficult to pay off your debts.

A payday loan company, on the other hand, runs strict checks to see whether you meet the affordability criteria, and will only provide you with a loan if they can see that you can afford the repayments. Payday loans’ affordability assessment helps you avoid taking out credit that you can’t afford.

Credit cards are an easy way to fall into a debt spiral. If you can’t pay off any more than the minimum payments, your credit card debt plus the interest will just continue to pile up according to how much credit you spend each month.

On the other hand, if you can afford to pay off your credit card monthly with a lump sum, you’re doing well! This can be a great tool to build your credit score which can help you borrow more credit in the long run.

The Ins and Outs of Payday Loans

Affordability Checks for Payday Loans

The FCA closely regulate the payday lending market. This means that responsible lenders will not lend to a client who fails the affordability analysis. Unless the client has a clear plan of how they will repay the loan in a timely manner, the lender will not fund the loan. Since the criteria for getting a payday loan are much higher, it is less likely for someone to fall into a spiral of debt they cannot repay.

Quick Cash Payments

Have you ever applied for a payday loan? If so, you will know the process. You spend a couple of minutes filling out a form, usually online. An underwriter then examines your application and decides whether to grant you the loan. Once you’ve been approved, your payday loan provider usually transfers the funds to your bank within a couple of minutes. There is very little wait time to get funds you are confident you can repay.

No Hidden Fees on Loans

Payday loan providers tell you the APR as a percentage rate so that you can compare them with other providers. The APR includes all fees, so there are no surprises later on. Payday loan providers tell you all the fees up front so you can make an informed decision that works for you.

Payday Loan or Credit Cards – Which One Should You Choose?

Before entering into any credit agreement, it is wise to carefully consider your options. Remember that payday lenders are heavily regulated by the FCA, which means that the lender has your best interests in mind when providing you with quick cash loans. If you’re having difficulty meeting a repayment date, let your lender know in advance. Your lender is obliged to listen to your request for breathing space and will work out a mutually agreeable solution with you. Quick loans express advises you to make a careful decision and take the cheapest, most reliable finance option for your needs.

Crystal Evans is a contributing author for QuickLoansExpress. Crystal started her career in finance doinng merchant cash advance pricing for a boutique USA lender. She then moved to the UK where she worked as a payday loan underwriter for several years before leaving her job to freelance as a personal finance writer. She can be reached via her Linkedin profile.

The article "Should You Get a High-Cost Loan or a Credit Card?" was last modified on

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