First up, we’ll cover credit cards – what everyone thinks of when it comes to accessing credit.
Credit cards offer instantaneous access to a line of credit – which is a pool of funds you can dip into, up to your card’s limit, in a wide variety of places, from restaurants to online shopping. In terms of convenience, credit cards are king.
Credit cards can also offer a variety of perks in return for making purchases with them, such as rewards programs, warranties for goods purchased, and frequent flyer miles with various airlines. But remember: you can end up paying for these perks.
The downside also is that fees and interest on the amount spent can be quite high. You can choose to pay the total balance outstanding each month or only the minimum repayment. If you choose to only pay the minimum you could quickly rack up a debt higher than you can afford with the interest charges. Always make sure you’ve got the cash flow to pay more than the minimum repayment before the interest piles too high.
Credit cards work best for smaller, more spontaneous purchases, as well as emergencies, such as being stranded when travelling and needing to book a hotel, or emergency plumbing repairs.
Our Credit Cards offer you the choice between up to 55 interest free days with our Visa Classic, or a lower interest rate with no interest free days on purchases and no annual fee with our Low Rate Visa.
Personal loans, on the other hand, offer access to a predetermined, once-off lump sum of funds, with a longer-term payment period that has an end date for when it will be paid back. Compared to some credit cards, personal loans often offer lower interest rates when they are secured, for example by a car, and will be for the same amount of borrowed funds paid off in the same time period, be noticeably cheaper than a credit card.
Loans also allow for less temptation – you might say they’ve got financial discipline built in, as personal loans are a lot less flexible than credit cards. Few personal loans offer a redraw facility and those that do only allow you to borrow back payments you’ve made in addition to the required repayment. That way, personal loans are always paid off within the time frame they were taken over – usually no more than a 5-7 year period.
Personal loans work best for large, planned, strategic purchases, such as renovations, holidays, or buying a car. You can easily work these purchases into your existing budget, and plan for how they will affect the rest of your finances.
We offer secured and unsecured personal loans with the choice of fixed or variable rates. Learn more about our personal loans.
As you can see, credit cards and personal loans have the same essential function, but are different financial tools for different financial situations. Both can form a handy part of your financial toolkit, but you definitely need to know when and how to use them.
Speak to our lending staff on 02 6763 5111 to discuss your options and which one is best for your needs.
Terms & conditions, eligibility and lending criteria apply