Articles > Overdrafts and Credit Cards

While neither of these options are recommended by us for medium or long-term borrowing, they can have their uses for people who need quick access to extra money for a short period of time. Both credit cards and overdrafts are offered with most bank current accounts, meaning they are forms of credit that are widely available.

With such ‘instant access’ forms of credit, it is important to realise that they are just like any other form of loan, and that you will be charged interest on the money borrowed (in many cases there may be a short period interest free, after which interest will start to accrue). Before making use of such credit, you need to be sure that you can afford to meet the repayments and you are happy with paying the amount of interest that is going to be charged.

There are a number of cases in which using a credit card, or dipping into the overdraft can be beneficial to taking out a personal loan, mainly these cases are when the money is required quickly, and as personal loans can take a few days to arrange they can at times be impractical.

In terms of credit cards, there can often be extra benefits such as the protection offered to the consumer through the consumer credit act. There are things to be aware of however, the main thing is that these types of credit are designed for the short term, and for low amounts. Because of their nature, they carry relatively high interest rates – this isn’t a problem as long as you are aware of what the costs are, and that you pay back the loan in a timely manner. If you are going to need to borrow for a longer period than a few months, then a personal loan is a better option that will cost you less money in the long run.