What is the difference between payday loans and credit cards?

You can use short term loans to cover one-off emergency costs that you can’t afford to cover right away. They are great when you need access to a limited amount of cash quickly and easily, usually through an online direct lender.

Credit cards, on the other hand, are more useful for covering day-to-day spending or large purchases. You can buy items with your credit card and you will be charged interest on the credit balance you build up. You can repay this balance in full each month, to keep interest to a minimum. Alternatively, you have the option just to pay the minimum payment that your credit card provider requires, but that will mean your balance grows along with your interest charges.

Credit card providers tend to have quite strict lending criteria, whereas you may be able to get a payday loan even with a less-than-perfect credit rating. Credit cards will take a few days to arrive after you’ve been approved, so the money won’t be available as quickly as with a short term loan, which is usually in your bank account on the same day that you apply. The cost of borrowing, meanwhile, varies from lender to lender and between credit card providers. Your credit record will also have a bearing on your interest rates, along with the amount you borrow.

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Representative Example: Borrow £400 for 4 months: 3 monthly repayments of £156.09 followed by a final repayment of £156.07. Total repayment £624.34. Interest rate p.a. (fixed) 288.35%. Representative APR 1,267.9%. 

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