Credit Card vs Personal Loan: Which Is Cheaper for Borrowing?
The Short Answer For a small amount you can repay within a few months, a credit card is usually cheaper — especially if you use an interest-free introductory period or pay the balance in full before the statement due date. For a larger amount you will repay over one to five years, a personal loan is usually cheaper, because its interest rate is normally much lower than a credit card's standard rate and the repayments are fixed. The honest answer is that neither product is always cheaper: it depends on how much you borrow, how fast you repay it, and the rate you are actually offered. This guide compares the two side by side so you can work out which one costs less for your situation — in the US and the UK. It is general education, not a recommendation to borrow. If you can avoid borrowing at all, that is always the cheapest option. How a Credit Card Charges Interest A credit card is revolving credit: you can borrow, repay, and borrow again up to your credit limit. Interest is ...