Payday loans vs. credit cards- which one is better

Currently, more people are using payday services compared to credit cards.  It is relatively convenient to obtain loan for a payday lender than it is to get a credit card.  If you have found yourself in an emergency situation that need quick finances then you have had the option between the two.  There have been sparkling debates to determine which one is better than the other, with both sides getting their fair share of supporters. Here as a review comparing the two

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With a credit card you can simply take money out of your account and with a payday loan, you simply have to apply online and the lenders transfer the money to your account immediately or within the day.

If you do not have a credit card, you will have to apply for a new one and wait for around two weeks to get on. Both the credit card and payday loans can be applied through a computer or a Smartphone.

Time and use

For a credit card, you have access to the funds for a long time. The time is usually set to around one to three years, depending on the lender’s terms. You do not have to reapply for another credit card every time you are in need of money. This can be helpful when you have a financial emergency

With payday loans, you have to apply and wait for approval every time you need funds. As long as you have an unpaid payday loan, you are not eligible for another loan. Payday loans are not so helpful if you have a loan and are looking for funds for an emergency.

Amount and payment

Most credit cards lenders give you large sums of money and don’t expect you to pay back right away. This helps you plan on a payment method and save well before having to pay the loan.  You have the options of paying minimum monthly, quarterly or yearly payments until the debt is cleared.

Most payday loan lenders have a minimum amount that is set by the government. You cannot receive an amount that is more than your monthly income. The time limit to pay most payday loans falls within a month. If you don’t pay on time you may face serious penalties

Interest rates

If you borrow money through credit cards, interest rates are added to your loan monthly.  This means interest rates increase more if you don’t make the arranged payments.  When you receive credit cards, you are not charged to transfer the money to other accounts. If you have a good credit report, the interest rates on your loan are decreased.

When you receive payday loans, the interest accumulates immediately but they do not go up until the payment period. For late payments penalties are applied. Interest rates are increased subsequently until you finish paying off the payday loan. Your credit score does not matter when it comes to allocation of this loan.

My pick

Pay day loans are good if you are looking for short-term quick cash. If you manage your payments well you will not suffer consequences concerned with interest rates. With payday loan, the more you borrow and pay the higher the loan limit becomes.