CHOOSING BETWEEN A CREDIT CARD AND A PAYDAY LOAN
So you need some extra funds to help with some unexpected expenses. And you don’t know if a credit card or a quick payday loan is the better option. The first step to figuring out which option is right for you is to ask yourself a few simple questions.
1) How’s your credit rating?
If the answer to that question is “not great” or “bad”, then a payday loan is the best option right off the bat. Credit cards companies don’t generally take into account the rest of your financial profile. Once you have a less than good credit rating, your chances of being approved for a credit card are slim. Payday loans, however, will often look past the bad credit score as long as you have a steady stream of income.
2) How disciplined are you?
Go ahead and answer that one honestly. We all know ourselves and our level of financial discipline. Are you able, willing, and disciplined enough to pay off the entire credit card balance when the bill comes in? Or will you pay the minimum required and continue like that for a while?
If you don’t think you can pay the entire credit card (or you can but you know you probably won’t!), then the interest you would be racking up over time will continue to climb. Alternately, the payday loan repayment gets done in 1 or 2 quick payback amounts of equal amount. It is automatically taken from your account on the days that you choose so you can rest easy and forget about it.
3) What does your monthly budget look like?
It is always important to know what amounts come in every month, and what amounts go out every month. Having a monthly budget is therefore an important aspect of keeping finances in check. With a payday loan, you know exactly what amounts will be coming out that month so you can manage it in a way that fits your monthly budget. With credit cards, as the balance on the credit card changes, your minimum payments due also change thereby making it more difficult to figure out how it fits within your budget.
4) How quickly do you need / want your funds?
Often, when unexpected financial surprises pop up, they are generally of the “I-need-money-FAST” variety! The process for applying for a credit card is generally just as quick and easy as applying for a payday loan, the main difference however is the wait time for receiving your funds. Credit cards are still snail mailed to you, and then you have to call to activate your card, etc… It can easily take 7-10 business days before you have access to any money. With iCash payday loans (we are only self-promoting on this one because we can’t speak for our competitors on their wait times), we can almost always have your funds deposited same day (business days).
There is no one solution that is right for everyone. Finances are different for each person and the best solution is often even a mix of both. But hopefully these few questions have helped you to make an informed decision on some of the differences between credit cards and payday loans.