Turns out, credit cards are not the ‘be-all, end-all’ of alternative payment methods. At least not the ‘end-all’ part.
Paying for things, from homes to cars to all sorts of bits and baubles, with money you do not own yet has been a standard, acceptable form of financing since the credit card’s introduction in the 1950s. It exists in the market regardless of one’s financial or social standing — so long as the banks permit a person to receive a credit card in the first place.
In the past 10 years, credit card balances have risen by 46%. Personal loans, on the other hand, have grown by just 17%. Nothing may seem amiss about these figures, except when one considers the numerous benefits personal loans offer that credit cards do not.
For one, personal loans are the more sensible choice when it comes to large purchases. Professionals from Rapid Loans advise customers to take out a personal loan instead of using a credit card when it comes to paying for something major, like a car or a home project. This way, users will have an easier time making repayments, given that their credit score is high enough to qualify for larger loans.
If personal loans are the superior choice for large expenses, why do people remain heavily dependent on their credit cards? Financial advisor Bessie Hassan believes that the credit card owes its prominence not just to convenience, laziness or cluelessness, but rather a combination of the three. Some novelty does not hurt either.
‘[Personal loans’] popularity is waning compared to plastic, which is quick and easy to use’, Hassan puts bluntly. ‘Some borrowers even have their debt spread out over multiple credit cards which can be risky if you can’t make payments in full and on time’, she adds.
Lending institutions are making a push for more convenient transactions, as online loans slowly take over the industry as the digital standard. But, as long as people can take out money they have yet to own in the form of a plastic card, repayments will remain as urgent as they are difficult to make.