There are many different types of loans. Some are for specific purposes, but there are also a range of loans for general purposes and these include the credit card. Many people do have credit cards and find them a very convenient way to spend money. They are accepted by most retailers, you have access to an agreed sum of money, you can pay it back when you want to and sometimes you get insurance on the items that you have purchased with the card. It may be the only safe way to buy things online and it can be very much quicker to use in shops than fiddling around with cash.
It may seem that a credit card has many advantages over other loans such as payday loans and it does. Not only are the above things true but it also is easy to fall back on. With most loans you have to negotiate it, you get the money and then have to pay it back. With a credit card, you can borrow up to a certain amount of money, pay it back when you want and then borrow more, up to a certain limit whenever you need it. This means that it is almost like having a constant pool of money to draw from. This can be extremely useful but there are disadvantages as well. As the money is always available and very easy to get hold of, it is therefore very easy to spend it without much thought. When you borrow money, you should really consider whether you really need the loan, whether you can afford to pay it back, how much it will cost and whether there are cheaper or better options available. With a credit card, it is too easy to just use it for purchases and worry about these things afterwards and this is why many people get into trouble with a credit card.
Some credit cards have a cash back facility, where you get a certain percentage of cash or perhaps loyalty points for spending money on the card. Again, this is good for some spenders as it means that they can benefit financially form having the card. It is important to realise though that these benefits are tiny compared to the cost of the interest on the card. Therefore unless you use the option to repay the card in full at the end of the month and therefore have no charges, it could work out expensive for you. It can be tempting to think that you are benefitting when in fact cash back cards or those giving rewards or points tend to have higher interest rates than those not offering these benefits.
Repaying a credit card can be tricky too. If you have a loan with regular repayments then you know that it will be repaid and when. However, with a credit card you can just pay off a minimum amount each month and there is never any pressure to pay back any more than just that. This means that you could end up being in debt for a very long time and the cost of the debt will keep growing and growing. As you are paying off the interest each month it is easy to forget that you are actually paying for this borrowing and it is hard to add up the cost as you keep paying it off. However, this sort of loan can be very expensive. Not only are the interest rates high compared to other types of loans, you can also repay them over an extremely long term which will increase the costs.
So although the credit card can be a lot more flexible than other types of loan it is not necessarily better. It needs no regular repayments just a minimum balance and can be used to purchase many different things. However, the cost of it can be a lot dearer than other types of loans. This means that you will pay a lot more for the items that you buy with it than you would if you did not borrow the money that you were using to pay for them. It is also very easy to use it to borrow money without much thought, so you could end up spending a lot more money than you should while using it.