Personal Credit Cards


Personal loans are one thing, but credit cards are another entirely. Unlike a debit card, a credit card is issued to consumers as a system of payment. It allows the consumer a line of credit from which the consumer can borrow money under the promise to pay it back. While credit cards are designed to allow consumers to pay for things in stores, there are other functions. Balance transfers and cash withdrawals are two other potential uses of a credit card, which are available both at home and abroad. Many credit cards offer rewards and benefit packages, such as enhanced product warranties, free coverage on new purchases and various kinds of insurance protection. They may also offer a rewards points system which can be redeemed for cash, products or airline ticket.

“Many credit cards offer rewards and benefit packages, such as enhanced product warranties, free coverage on new purchases and various kinds of insurance protection.”

credit card2How do I apply for a credit card?

Credit cards are typically granted by a credit card provider or financial institution and come with a credit limit. The credit limit is the total amount you have available to spend using the credit card. It is wise to always leave some available credit on the credit card, so as to cover not only any unforeseen or emergency expenses but also to cover any applied interest. Credit cards are even easier to apply for than personal loans, as they involve less stringent credit checks and can be approved automatically. As is the case with loans, credit cards can now be applied for via post, over the phone and on the internet. Most credit card companies quote around 14 working days from application to receiving your card, but this is usually for applying by mail which is the slowest process.

How do I use a credit card?

Using a credit card is easy: you simply present your card and punch in your pin number when purchasing items, then pay off your bill at the end of each month. Simple, right? However, immediate access to funds can cause some to be reckless with their purchases or else use a credit card in a way that is not beneficial to the consumer. So, what can you do in order to make the most out of your plastic? Being financially responsible and smart with your purchases is one things, but these tips can help:

  • Avoid cash withdrawals when possible. Each withdrawal will include a cash advance fee which is perhaps the number one hidden fee where credit cards are concerned. These can really impact your balance when they add up, so invest in a withdrawal card for this purpose.
  • Stay within your limits is perhaps an obvious piece of advice that can apply to many areas of finance management, but is especially important with credit cards. Most credit cards carry a fee for spending beyond your limit; there will also be late fees when you neglect to pay your bill on time.
  • Make regular payments, or even set up a system of direct debit so as to ensure you don’t forget to pay – simple distraction is one of the main reasons for missed payments. Making regular payments is a good way to build your credit rating, or else repair your rating if it is low.

Credit cards vs. Personal Loans

So, how do credit cards differ from personal loans? Which one should you choose? Well, ultimately, it all depends on your financial situation and your ability when it comes to repaying debt. There are however some general advantages and disadvantages when it comes to credit cards and personal loans that are worth pointing out:

Advantages of credit cards over personal loans:

  • You don’t necessarily need great or even good credit to qualify for a credit card. This is opposed to the stringent credit checks associated with applying for a loan, making credit cards the best option for those with a lower credit score.
  • Similarly, it is very easy to apply for a credit card. Applications do not involve meeting with the lender, and can be processed in a matter of days – much faster than when applying for a personal loan.
  • Some credit cards offer very low introductory rates, meaning that you can pay little to no interest initially.
Advantages of personal loans over credit cards:

  • A personal loan will usually offer a lower interest rate than the standard rate on a credit card; it should be noted that credit card interest rates are also subject to change and can do so with little warning.
  • Personal loans offer a large sum of money in one payment, meaning that they are ideal for large expenses. Credit cards have a limit, meaning that they may not help when funding the purchase of a new car, for example.
  • Loans will also have a fixed payment schedule and amount, making them much more easier to budget for than a credit card.

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