Compare credit cards to payday loans in Canada
If you’re in a situation where you need money fast, you may be tempted to get a payday loan. However, a payday loan can be more expensive than using a credit card, so make sure you understand the difference between the two before deciding which option is best for you.
Payday loans are more expensive than credit cards
A credit card and a payday loan are both forms of short-term borrowing, but there are some significant differences between the two. For one thing, a payday loan is an unsecured loan. This means that it can be used to fund a variety of needs, such as rent or utilities.
A credit card is a form of rolling credit, which allows you to borrow money up to your credit limit without having to write checks or incur extra fees. However, this can lead to a higher risk of falling into debt.
Unlike a payday loan, a credit card can be used to cover larger purchases, such as a car or home. It can also help you build up your credit score. A credit card with cashback offers can also be beneficial.
Typically, a payday loan requires a higher fee than a credit card. An upfront fee can range from 5% to 24% of the amount borrowed. It’s a good idea to ask about fees if you can’t pay off the loan within a specified period.
Most provinces have rules regarding payday loans. Some jurisdictions require a payday lender license. If you have any questions, it’s best to call your local payday lender to make sure you have all the information you need.
Taking out a payday loan may seem like the perfect solution to a short-term problem, but it can actually be very expensive. The typical loan comes with a $15 fee per $100 borrowed. This equates to a 400% annual percentage rate for a two-week loan. This isn’t even considering the ongoing interest.
The typical payday loan has a two-week repayment period. This isn’t as long as other forms of borrowing, but it’s enough to keep you from getting into serious financial trouble.
They’re designed for short-term immediate expenses
The credit card industry has come a long way since its early days. In addition to offering a competitive range of interest rates and fees, a modern day cardholder can choose from a plethora of options including rewards based on a variety of factors, such as creditworthiness, time of day, and location. The ubiquity of the modern day bank also makes it easier for a shopper to shop around for the best possible deal. A savvy consumer can now easily find the most suitable card with no fuss, no hassle. The modern day consumer can also be well armed with a multitude of perks such as complimentary insurance, free shuttle services, and an array of upscale restaurants, clubs, and bars to boot.
They’re meant to get you to the next payday
Payday loans are high-cost, short-term borrowing options that can lead to severe debt. Those who take out such loans often find themselves unable to repay the loans on time or at all. This leaves the borrower in perpetual debt.
Payday loans are targeted to people who have low credit scores and are in need of funds to cover emergency expenses. They are typically used for emergency expenses, such as rent or utility bills.
These loans are easy to obtain, as there is no credit check. The loans are unsecured and have a high annual percentage rate (APR) and fees. However, they can be helpful for people who have no other option.
Some lenders like Focus Cash Loans will report late payments to the credit bureaus if your payday loan becomes delinquent. That can harm your credit score if you don’t make your payments on time. If you can’t pay your loan off on time, ask about the penalties for non-payment.
A typical payday loan has an APR of around 400%. This means you can pay a $1000 loan back over 18 months at $520 in interest. That’s more than three times the APR you’d pay for a credit card purchase.
Despite the costs, payday loans are tempting to many borrowers who are struggling with financial problems. This is especially true if they’re not sure they can pay it back on time.
If you are concerned about your ability to repay your payday loan, consider getting free credit counseling from a nonprofit agency. You can find a list of agencies online. There are also local charities that offer help. Some examples include the Salvation Army, United Way, and the St. Vincent de Paul Society.
If you can’t afford to pay off your payday loan, you might be tempted to try a cash advance on your credit card. Unlike a payday loan, a cash advance will have an upfront fee.