Credit Card Or Loan?

When you need emergency cash, then access to credit can get you out of a pickle. Your choices generally involve a loan or a credit card, but which is best? Read on to find out the pros and cons of each to decide which might be best for you.

Credit cards

There are hundreds of credit cards on the market, and a credit card offers a convenient and flexible way to cover an unexpected cost. They remain a very popular form of credit with over 50 million credit cards in circulation in the UK. But there are also pitfalls. Because it is easy to borrow, it’s possible to rack up lots of debt very quickly, and without self discipline a small debt can very quickly become a large one.

The way credit cards work is by allowing you to pay for something, repayable at the end of the month. What you pay for this depends on the card interest rate. Many offer 0% interest for a period of time, meaning that you pay nothing at all for borrowing. However, once this period is over, you’re then liable for interest. Other cards normally charge around 14% of the amount you owe.

The Cons of Credit Cards include:

  • The danger of large debt, especially if you make only the minimum repayment every month
  • High fees and charges for breaching your credit limit or missed payments
  • High fees for withdrawing cash or using abroad

The Pros include:

  • Flexibility in borrowing
  • Cost effective or free borrowing provided you stay within the terms
  • Consumer protection for purchases over £100
  • The ability to use the card globally
  • Confusing rates

If you are eligible for a 0% or low interest card and have the income and discipline to pay in full every month, then a credit card could be a good alternative to a loan.


A loan is credit extended to you provided you have the ability to repay a fixed amount every month. In the case of very short term loans such as payday loans, this is normally within one month. As loans are fixed amounts repayable over a certain amount of time, they’re less confusing than credit cards and it’s impossible for spending to spiral out of control. Unless you are borrowing a very small amount, then a loan is often a cheaper option than a credit card provided you look in the right places. Online loans are much cheaper than high street lenders, and an online loan broker such as can help find the best deals.

The Pros of loans include:

  • Setting your repayment terms (length of loan etc)
  • Simple fixed repayment arrangements
  • Only being able to spend what you have borrowed

The Cons include:

  • Losing your home if you fail to repay a secured loan
  • Borrowing small amounts costs more
  • Early repayment charges

On the whole, loans are a safer option if you lack the discipline to control credit card spending.

Wendy Lin is an established businesswoman and a freelance painter and writer. She has lived in 6 countries and speaks 3 languages.