Credit Card or Loan?

If you are in need of some extra money to fund a big purchase, an unexpected cost, or even to invest in a form of borrowing to bring your existing debt together, then repay at a lower rate then you may be considering a loan or a credit card. Below, we provide details as to why a credit card may prove to be more effective when minding costs.

Credit Cards

When you make a purchase using a credit card you are automatically given purchase protection and fraudulent uses protection. This allow you to claim reparation from your credit provider in the event of a loss, damage, or fault in any goods between £100 and £30,000 purchased with a credit card; this falls under the Consumer Credit Act. More recent has been the development of the Consumer Credit Directive which covers costs for goods over £30,000 up to the cost of approximately £60,000.

With a small purchase/borrowed amount a loan charges high interest fees, whilst a credit card will offer lower interest, or none at all. If you do use a 0% interest credit card you must ensure, to minimise costs, that you repay it in full before the 0% period ends.


A credit card has a certain level of uncertainty, especially if you know exactly how much you are going to need to borrow, as you could receive a lower than expected credit limit.

Another point against credit cards is the self-discipline needed to pay off your debt before the 0% interest period ends. A loan however, gives you the specific amount needed, with an agreed term and fixed interest. This makes loans more straightforward.

With both a loan and a credit card you have an option to pay off any debt early, providing the terms of your borrowing detail this as acceptable; this may not be the case with all loans.

There is no final answer to this problem, but all interest rates and periods must be considered before application. Before you decide whether to take out a loan, or apply for a credit card, you must always compare your options using out intelligent and personalised product options based on your credit score.