Two of the largest sources of credit for Americans are credit cards and payday loans. They are very similar in many ways. But the differences between them are significant. We will discuss some key differences that make credit cards an even better option than payday loans if you try Oak Park Financial.
Similarity: Credit cards and payday loans are both short-term loans
A payday loan or credit card can be used for immediate, short-term expenses. These loans give you an extra money you can use whenever you need it. Both charge interest on the money you spend and require repayment within a very short time frame. This can be anything from a few weeks up to several months. Here is the end of their similarities.
The differences between
- Payday loans are cash. Credit cards are credit lines A $300 payday loan will give you $300 in cash. A credit card, on the other hand, allows you to spend up $300 but does not immediately add funds to your bank account. You should note that credit cards can sometimes not be used to pay certain bills, such as rent, utility, cable, or cell phone.
- A payday loan for $300 instantly gives you the whole amount. You will still be charged interest even if you don’t use the $300. A credit card, on the other hand, has a credit limit and charges only interest for what you use. The key concept is the use of funds. Payday loans make all funds available to you on day 0, so interest is charged on the entire amount. A credit card allows you to only use funds when you make purchases on it. The interest rate starts as soon as you swipe your card. It is only the amount that you have charged. You won’t pay interest if you don’t use your credit card.
- Credit cards come with a grace period of interest free! The payday loan interest counter is activated immediately. With credit cards, you pay only the amount you use. Credit cards also offer a bonus called the credit card float or recent activity grace period. This beautiful period of zero interest runs from the moment you swipe your credit card to your next credit card statement. You will not pay interest if you pay the purchase amount when you receive your next statement. If your purchase occurs within the last 30 days, this period can be quite long. Strategic timing of purchases will help you manage your cash flow and reduce interest costs on your credit cards.
- Installment loans and payday loans are more expensive than credit cards The average US credit card charges 18% interest. However, most entry-level credit cards cost around 22%. On the other hand, payday loans charge over 400% interest. Payday loans are more costly than credit cards. Payday loans are more expensive than credit cards. Installment loans, including Oak Park Financial Loans, are not exceptions. Your credit rate will be lower in almost all cases. You should pay off higher interest loans first to reduce interest costs.
- While payday loans are not flexible in terms of payment and amounts, credit cards allow you to pay the debt off at any time. You will receive a monthly statement. Credit allows you to pay principal and interest at your own rate. You can choose how much you want to pay and when. Traditional payday loans require you to make a predetermined payment on a certain date. Traditional payday lenders often charge fees to change payments and make it difficult for you to change your payment. This is a nickel-and-dime strategy to make them money, and exactly what we dislike about airlines today.
- A traditional payday loan can be obtained without a credit check. Credit cards, however, require a credit report Credit card are less expensive, more flexible and easier to repay. What’s not to love? Why don’t everyone have a credit card? It’s surprising how many people don’t know this, but credit cards require good credit histories. A credit score below 600 or a very poor credit history will prevent you from getting a card that offers a low credit limit.
Oak Park Financial combines credit card flexibility with payday lending
We recognize that not all people can afford credit cards and payday loans. Our Oak Park installment loans were created by Oak Park to assist people with low credit scores in getting emergency cash and rebuilding their credit. Our loans are the most affordable on the market with the longest repayment terms. We understand that unexpected financial events and financial emergencies can happen. Therefore, we are able delay or break up payments to fit your budget.
We recommend that you first look at an installment loan before you consider a payday loan. These are some alternatives. We hope you have understood the differences between payday loans, credit cards, and why credit cards are better.