Is Credit Card Better Than Payday Loan?
Have you ever been to a mobile phone store, scanned through all the models on display like a small kid looking for his favorite candy? In all probability you have done this. The chances are also high that you came out of the store realizing that you did not have enough money in your wallet to buy the Smartphone your boss owns?
Do you remember the day you had to put a few grocery items back into the shelf because you weren’t carrying enough cash to pay the bill at your neighborhood store? No? Well, you are lucky. There are many people who have had to postpone their purchases due to lack of funds. This could be pushing the date to buy paint required to repair the house or to even give up on one’s dream watch.
So what does one do to finance purchases and manage emergency expenses? You either use your credit card to pay the bill or take a payday loan. Which is a better option?
To decide that, it is important to know the difference between the two.
What is a Credit Card?
A credit card is what in common parlance is referred to as plastic money. It is issued by banks and can be used to make purchases, pay bills and make cash advances. The repayment is done only when the bill arrives in a cycle of 30-45 days. It entails interest and gives the user an option to either pay a minimum amount, the full amount or make a part payment. Banks issue credit cards only to customers with a good credit score.
What is a Payday Loan?
A payday loan is given by banks and financial institutions as a one-time payment for a specific period of time. It is provided with direct debit option on the customer’s payday. This loan facility can be availed by even those with a poor credit score. It is sanctioned at short notice provided the person has a regular source of income and a bank account. Repayment options vary from one time to regular equated installments depending on the lender.
Should You Opt For a Credit Card or a Payday Loan?
If you require some money at short notice in an emergency then a payday loan is easy to avail. A credit card along with coming in handy during an emergency can also be used to make routine purchases and payments. In case of a credit card if the total amount is repaid during a specific time period, the payment becomes interest free. A payday loan on the other hand always comes with interest and that too slightly higher than a credit card.
Don’t forget, to own a credit card you must have a good credit score. To avail a payday loan, lenders often ignore your credit scores.