It is difficult to find people who pay for expensive goods in one payment. As a rule, televisions, washing machines, dishwashers, refrigerators, not to mention cars and residential real estate, are purchased on credit. Buyers make a small down payment (it is possible without it), use the equipment and pay monthly. Yes, you will have to overpay for the product, but monthly fees are somehow invisible than the entire amount at once.
There are two types of loans from financial institutions. Therefore, below we will consider what is easier to take out a cash loan or a credit card. Each type has its own nuances, advantages and disadvantages. Therefore, it will be more profitable for some consumers to issue a card, for others – a consumer loan.
What is a credit card (CC) and consumer credit (PC)
PK refers to a loan issued to a borrower to pay for services and/or goods. This type of loan can be untargeted or targeted.
In the first option, the size of the loan will be small, and the interest rate will be high, if compared with targeted loans. However, such a loan is more popular among consumers.
The target PC is offered by the lender for the purchase of a specific product or service. For example, the purchase of a car, a tour, medical tourism, etc. Moreover, registration can be carried out in a store / travel agency where a bank representative sits. This saves the buyer from visiting the bank.
CC is a financial instrument for multiple borrowing of bank money in order to pay for services / goods, make transfers, cash out funds. The amount on the card can be different, and it depends on the solvency of the plastic holder.
Differences in banking products
Although the purpose of both banking products is the same, the conditions for them are different. Therefore, we will analyze how a credit card of a financial institution differs from a consumer loan.
With a PC, interest is calculated immediately. If you take a loan, but spend nothing and after, say, 10 days, fully return the borrowed funds to the bank, you still have to pay the accrued interest!
KK can be kept for a rainy day. Interest is calculated after the first transaction on the amount owed! For example, you were approved for 30 thousand, but you spent only 10 thousand from the card. Bank interest will go to the last amount. Unlike demand. loan, here the rate may vary based on the operation (cashing out, transfer, non-cash purchase).
In terms of interest rates, a PC is a more profitable product. If we take into account the information for January-March 2022, then on average, they were higher for credit cards by almost 10 points, 33.4% (and even higher for cashing out) against 25.46% per annum. After the Central Bank cut the key rate, these figures also decreased, but the difference remained at the same level.
However, the presence of a grace period of 51 days or more can nullify the advantage of consumer credit. For responsible clients who know how to adhere to contractual obligations, the interest-free period is a real find. Take the bank’s money, return it on time and do not pay interest! There is no grace period for PC.
It is better to pay off your credit card debt during the grace period so as not to pay high interest. But if this fails, you need to make a minimum payment every month, approximately 3-5% of the debt. Cons. The loan is repaid in equal monthly installments.
You don’t have to pay for the registration and issuance of a PC, but a commission is possible for a QC. It all depends on the policy of the lender.
Consumer credit can be issued in cash. But even when transferring to a borrower’s debit card, you can cash out funds without commission. With a credit card, such a transaction is unprofitable. Not only will the collection be serious, but also, in most cases, the grace period does not apply to the cashing out procedure!
Acquisitions by CC can give its holder a cashback. It all depends on the terms of the payment instrument. There are no PC bonuses.
Pros and cons of a credit card
Let’s take a look at the credit card.
- Interest accrual starts only after the transaction and only on the spent amount
- QC can be issued for a rainy day. She will play the role of a reserve so that in difficult times she does not turn to loved ones for help.
- The presence of a grace period allows the holder of a credit card to use borrowed funds almost free of charge and not pay interest
- It is possible to receive cashback for purchases
- After the return of borrowed funds, the credit line is renewed
- The limit may be increased if the borrower fulfills contractual obligations in good faith
- If you lose your card, you can quickly block
- Interest rates are high
- It is unprofitable to withdraw funds from the card (this is the rule for the vast majority of banks)
- Processing may take up to one week.
- If there are no POS-terminals in the outlets, the credit card cannot be used
- It is necessary to control the grace period to prevent overpayment
Pros and cons of consumer credit
Total consumer credit.
- The loan is issued for a short period
- You can withdraw money without commission
- Fast clearance
- You can pay at any point of sale, regardless of the availability of POS-terminals
- Interest begins to accrue from the moment the loan is issued and on the entire borrowed amount
- Rigid loan repayment schedule
- Grace period, revolving line of credit and no cashback
- If the loan term has expired, a new loan will have to repeat the registration procedure
What is more profitable to issue
If you, having looked at the pros and cons of two banking products, still have not decided which is more profitable for a bank loan or a credit card, we recommend that you complete the registration, knowing exactly the purpose of using the borrowed funds.
If you want to save on overpayment, choose a credit card with a longer grace period, from 100 days, and do not go beyond it. The best option is everyday use (purchases of goods and services). You will receive cashback and bonuses for daily spending, participate in loyalty programs, save time when applying for loans for purchases
If you need a large amount of cash or you find it difficult to understand the grace period scheme, you can apply for a consumer loan.
Now you know the difference between a credit card and a personal loan. Decide which banking product is more profitable for you to issue. If you are interested in our opinion, we prefer credit cards. Yes, they have disadvantages, but there are much more advantages than consumer loans!