couple contemplating on finances

Looking to make a big purchase? Do you need extra funds to handle an emergency? Whatever your situation is, borrowing money can be the easiest way to solve your financial needs.

When it comes down to loans, you have two main options: the credit card or an online lender. While one isn’t necessarily better than the other, choosing between the two may depend on several factors. Yes, both options give you the same privilege of borrowing money, but the best choice is the one that will save you the most amount of money.

The Rise of Digital Transactions

Technological advancement has paved the way for digital and cashless payment methods. Take online shopping as an example. The rise of shopping sites such as eBay and Amazon have shown that people are becoming more open with their financial transactions.

Let’s see how credit cards and online lenders match up.

Online Lenders

Shopping sites are not the only ones who have benefited from the emergence of digital transactions. The lending industry has also taken advantage of the same privilege. The rising popularity of online lending services has shown that the public demands this type of service.

Aside from banks and credit unions, acquiring a loan through an online lender can be the best choice you can make. Online lending platforms have a reputation for keeping costs low and have creative methods of determining one’s creditworthiness.


  • Just like regular loans:
    • They offer lower interest rates than credit cards and can be cheaper in the long run if the transaction encounters no issues.
    • Follows an exact timetable through regular payments (Depending on your financial situation, this can be a disadvantage)
    • By borrowing a fixed amount, you can budget responsibly in order to avoid overspending.
  • Allows lending of small amounts for short-term periods (Depending on the platform you choose)
  • Quick loan approval
  • No physical appearance necessary to apply


  • Just like regular loans:
    • Low payments that take longer can possibly lead to higher interest rates
    • You’ll have a set payment schedule to adhere to (Depending on your financial situation, this can be an advantage)
    • May make it difficult for you to qualify if you have a lengthy credit history.
  • The amount you can borrow is fixed to a certain amount
  • Absence of regulatory monitoring activities provided by banks
  • Since the process is done online, there is a risk that your data can get accessed by unauthorized personnel

Credit Cards

Unlike a fixed payment schedule from an online lender, credit card debt can last indefinitely. While cards have a limit, the amount you can borrow ultimately depends on your monthly bill and how much you are paying every month.


  • Credit cards are better for quick and easy transactions.
  • Perks and rewards come with usage.
  • Some credit cards have grace periods that can offer 0% interest from 12 to 24 months.


  • Using it irresponsibly can accumulate to larger expenses.
  • Even with an attractive promotional rate, promos eventually come to an end and your monthly bill can spike.
  • Credit card debt can accumulate especially if you make minimum payments.

When to use either of the two?

In the end, credit cards and online lenders are the same: both let you borrow money at an interest rate.

Choosing between a credit card and an online lender can be difficult, but comparing both options may be a good way to gain some clarity.

Out of all the factors presented above, the three main things you must take into consideration when choosing your preferred loan are the following:

  1. The difference in interest rate
  2. Extra fees – application, annual, late charges, etc.
  3. Your current financial situation

For small purchases you can pay off within a year, a credit card may be the better option. For big purchases that will take you a long time to pay back, online lenders are the way to go. While each case may differ, this is the general rule of thumb to keep in mind.

In the end, the best option may boil down to what is best for you in the long run. Setting aside all these comparisons, the option that will require you to spend the least amount of money will be the best choice you can take.