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Credit card vs personal loan

If you’re looking to borrow money, two common options are a credit card and a personal loan.

Which one to go for will depend on your individual circumstances, and what you need the money for.

Benefits of a credit card

Credit cards are a line of credit that offer:

  • flexible repayments
    flexible repayment options are available with a credit card - from paying off 5% of your balance each month to the full outstanding amount. You can tailor your repayments to suit your current financial situation[@financing-arrears-warning]
  • rewards and offers
    Some credit cards offer rewards for purchases, so you can earn cashback or loyalty points to redeem at several merchant locations. They may also come with offers, such as free lounge access and discounts, which can be redeemed at no extra cost
  • lower limits
    credit cards can have lower borrowing limits compared to loans, so if you want to borrow a small amount over a short amount of time, it could be worth considering a credit card
  • flexible borrowing
    you’ll be given a credit limit if approved for a credit card – you can borrow as much or as little as you want up to that amount
  • introductory offers
    some credit cards come with an introductory offer, such as interest free purchases for a fixed period. But if you don’t repay the balance in this timeframe, you’ll be charged interest

Benefits of a personal loan

Personal loans can offer:

  • a structured repayment plan
    you’ll be given a set amount to repay in instalments each month over the course of the loan, which can make it easier to plan your finances
  • high borrowing amounts
    you may be able to borrow more through a personal loan than on a credit card
  • a set amount
    you can decide on a specific amount to suit your needs. You may also be able to get a top-up loan if you need to borrow more
  • set interest rates
    with a fixed-rate personal loan, the interest rate will be set at one rate for the duration of the loan
  • lower interest rates

Can you transfer a personal loan to a credit card?

Depending on the lender and the type of credit card you have, you may be able to transfer the balance of your loan across. This should be outlined in the loan agreement, but if you’re unsure, contact your loan provider and check if there are any fees or charges for transferring your balance.[@financing-early-repayment-warning]

If you’re moving the balance to a 0% credit card, make sure you’ll be able to repay the amount during the 0% interest-free period to avoid being charged interest later.

Can you use a personal loan to pay off a credit card?

If you’re wanting to pay off your credit card balance completely, you may want to consider a personal loan.

As you’ll need to make monthly repayments, a personal loan can give a more structured repayment plan. You’ll need to pay interest, but a fixed-rate personal loan means you’ll be paying one interest rate for the full loan term. 

Make sure you’re able to meet the repayments on a personal loan. 

If you're not sure if a personal loan is right for you, you may want to look at an instalment plan, which you can repay over a fixed term.

Things to consider

Before you borrow anything, it’s important to consider what you can afford, taking into account any fees and charges, and the interest.[@financing-refinancing-warning]

There may be other borrowing options that are better suited to your needs, such as a mortgage if you’re purchasing a home or an education loan if you’re paying school fees.

It’s important to weigh up all your options before applying to borrow money. Applying for lots of credit can have a negative effect on your credit score.

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What next?

Explore more

Find out more about credit cards and how they work to help you decide if they’re right for you.
From education loans to rent loans, learn more about each type with our guide.
Find out how your credit score is calculated and how to improve it.
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