A Credit Card or a Loan? (Credit Cards in general)

Member Name: mazhar68

Product:	Credit Cards in general
Date:	27/07/01 (142 review reads)
Rating:

Advantages: see below

Disadvantages: see below

INTRODUCTION:

Credit Cards & Loans both have their distinct advantages & both also have a number of disadvantages.

Which is best for you depends on your actual needs, & how you handle debt & problems associated with it.

About a year ago before the rise of cheap balance transfer rates & 0% intrest rate Credit Cards. Loans were sold to many customers on the basis of consolidating all their Credit Cards into one loan & paying a cheap interest rate, the rates of Loans were(& in some cases still are lower then Credit Cards).
I,ve had both Loans & Credit Cards & i've just summarised below what I found as the main advantages & disadvantages of Credit Cards & Loans.


ADVANTAGES & DISADVANTAGES OF CREDIT CARDS:

Well the main advantage for some people can be a disadvantage for otheres i.e. the ease of obtaining a Credit Card & such a range to choose from.

With many Credit Cards such as Egg & Capital One offering 0% interest rates it's easier to get rid of your debt or make new purchases without paying a penny in interest.

They offer flexibility too you can choose to vary the payments. With interest paying cards the more payment you make the less interest you're charged on the remaining balance.

Buying products with Credit Cards can offer you protection, say if something went wrong with your purchase(for some purchases mainly over £50) accidently damaged or not fit for it's purpose you can claim a refund from the Credit Card Company if the seller refuses to refund you.

Their have been a few cases where a Car or other goods were purchased using a credit card & major problems occured soon after the purchase. The Credit Card company were obliged to offer refund if the company the goods were bought from refused or had gone Bankrupt.

Other advantages may include extended waranty I myself found it exremely beneficial when I bought a Washing Machine two years ago(using
a Credit Card which offers extended warranty). I was initially given one years manufactures warranty & two years from the Credit Card Company.
I have since had minor problems with the Washing Machine & the Credit Card Company have dealt with them to my satisfaction.

CashBack upto 2 or 3% in some cases is another advantage. Companies such as Egg & American Express are offering this although American Express (blue card) charges an annual fee so it subsequently reduces the amount you get.

The main disadvantage is the ease of use it's feels as if your not really spending money & if not careful can get you in too real debt. Many debt problems have actually bEgan from the use of Credit Cards.

Other disadvantages include the charges for withdrawing cash about 1.5% to 2% on whatever amount you withdraw upto your credit card limit & that leads me to the next set of disadvantages.

Going over your credit card limit or making late payments results in hefty charges in the region of £20 to £30 in some cases, others such as Barlaycard dont make any charges for this.


ADVANTAGES & DISADVANTAGES OF LOANS:

As i mentioned earlier the lower interest rates compared to some credit cards.

knowing that at the end of the term your loan will be paid off(if you havent missed any payments.).

Fixed interest rates on some Loans so you can budget for the payments. You can specify an amount which you'd like to pay each month although the term of the Loan may need to be shortened or extended upto a limit i.e minimum one year & with many lenders maximum five years..

No extra charges for having cash.

Main disadvantages include no flexiblity i.e you cant pay more or less each month.

You can only end the Loan by paying the whole balance off in one go or waiting for the term to end.

With some Loans if you redeem the Loan earlier your charged two or three months interest.

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CONCLUSION:
I have included some advantages & disadvantages of both Loans & Credit Cards although there maybe alot more as the terms & conditios change quite alot, so a best buy Credit Card for today may end up being worse if other lenders decide to improve their Credit Cards.
These are just some of the Best Buy Credit Crads at the moment.

Egg for 0% interest rates on balance transfers.

Capital one for 0% on new purchases.

Barclaycard for extended warranty.


FURTHER INFORMATION:

www.barclaycard.co.uk
www.egg.com
www.capitalone.co.uk
www.which.net (for bestbuy credit cards, they' offering a 30 day free trial of which online).
www.moneyextra.com (helps you choose a Credit Card to match your needs.)

Hope this helps.

Summary: