Credit cards 'can be cost-effective alternative to personal loans'

Those looking to borrow significant sums of money are advised to consider borrowing using a credit card rather through a personal loan.

A credit card can prove to be a more competitive way of borrowing than taking out a loan, it has been suggested.

An article in the Australian points out that borrowing via a credit card could see people benefit from lower interest rates, as long as they are disciplined enough to ensure that they always make monthly repayments.

Indeed, Canstar Cannex reports that consumers wishing to borrow $15,000 through a loan repayable over three years will shell out more than $3,300 in interest repayments.

However, taking out a 12 per cent credit card to borrow this amount will result in $2,810 being paid in interest, those looking to compare accounts could be interested to hear.

Louise Petschler, chief executive of Abacus, claims that the flexibility that comes with credit cards has meant they have become "an easy option for consumers caught up in the emotion of an immediate purchase".

She also cites the provision of interest free periods - which can last as long as 300 days - and loyalty point schemes as helping to drive the popularity of borrowing on a card.

Meanwhile, a recent study by InfoChoice revealed that a failure to shop around and seek the most competitive credit card deals costs people some $257 million in interest repayments and fees every year.

Posted by Emma North