Why 0% credit cards are a better option than payday loans

Close up of a green credit card

Payday loans are everywhere nowadays, and lenders try hard to convince customers that they’re the best option – but that isn’t the case. For most borrowers, 0% credit cards make much more sense, with many advantages over payday loans. Here are just a few:

Flexible borrowing

Among the biggest advantages of a 0% credit card is that you don’t have to over-commit yourself. If you need a little more later, then you can borrow a bit more on the card, secure in the knowledge that you won’t be paying more for the privilege. With a payday loan, you’ll need to decide up front exactly how much you want to borrow, creating a tendency to err on the high side “just to be safe” – which will always end up more expensive, since the total interest repayable will increase.

No massive interest charges

One thing everyone knows about Payday loans is that their interest rates can be eye-wateringly high. Even if you’re only borrowing £200 for a month, you could find yourself having to pay back £280 or more at the end of the loan period. With a 0% credit card, this simply isn’t a problem, so put the calculator away and relax in the knowledge that everything is far more straightforward: when you borrow £200, that’s the amount you’ll need to pay back.

Pay back when it suits you

With a payday loan, you’re unlikely to have flexibility as to when to complete your repayment of the initial capital. If unexpected expenses arise, this can prove to be a real struggle. The fixed fees many payday lenders charge don’t help, either. Rely on a 0% credit card and you can arrange your repayments to suit your circumstances. Providing you meet the minimum monthly repayment, you can split paying back the loan over more than one month.

Suitable for longer-term borrowing

A payday loan makes a very poor option if you need to borrow money for more than a few weeks, even with lenders who allow debt to be rolled over to a new month. Even conventional credit cards are cheaper, but loans taken out using 0% cards are still more desirable. Shop around to find the best card for you, as they’ll vary in terms of how long their 0% rates last, but both balance transfer cards and those which add no interest on purchases are out there.

Peace of mind when you buy

One of the best pieces of consumer finance legislation is the Consumer Credit Act’s Section 75. This guarantees that your money is safe if you pay for larger purchases with a credit card. It only applies if your bill is over £100, but it means that even if the retailer goes under, your card company will be liable and will refund your money. 0% cards mean even less risk. If you borrow from a payday lender, none of this protection applies, so you could lose everything.

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