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Borrow with Credit Cards
Apart for store cards, credit cards are generally reckoned to be one of the most expensive ways of borrowing. The annual interest rate is generally 2-3 times greater than a personal loan. However, cards are widely available and, if you already have one, you'll have a pre-set credit limit so borrowing up to that limit requires no additional arrangement. In short, credit card borrowing is easy.
The usual message with credit cards is to pay off the balance every month. If you do that, the rate of interest is not relevant and you should try to use a card that offers other benefits such as earning reward points or giving cashback on everything you spend. Should there be odd occasions when you can't pay off the balance, carrying some debt over to the next month is no big deal providing you can clear it then.
The problem with credit cards is that using them is so easy and credit has been so readily available that people have treated them as a means of supplementing their income. Instead of making planned purchases with budgeted repayments, the temptation is to use credit cards to buy things you can't afford. This often leads to a cycle of debt, with the outstanding amount rising each month. If you get into this situation and can't clear the debt at the repayment date, you need to look for a solution.
A short-term fix is to reduce the cost of borrowing by going for a card that has a low interest rate. Some cards offer a zero rate for an introductory period, which may apply to purchases, balance transfers or both. This may help the problem although there will be a charge to transfer the balance to the new card. If you do use a zero rate card, you ideally want to clear the balance before the introductory period ends and charges start. You must also ensure you make your payments on time because a missed payment can result in the special rate being cancelled as well as a charge being made.
There are other considerations when acquiring a credit card. Some offer additional benefits such as travel insurance and extended warranties. However, there may be an annual fee for the service and you'll need to factor this into your costings.
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