The fact that we live in a world based on consumerism means that we always need to have money on hand, in order to either pay products or services. Unfortunately, this is easier said than done, especially when considering the fact that prices are constantly on the rise.

Credit cards have been the go-to solution for many individuals for over two decades. However, the fast development of the online medium has created alternatives in the form of online lending services. These are offered by companies that function similarly to banks, with a few exceptions that can be advantageous to borrowers. Here is what you need to know in order to determine which one is the better fit for your needs:

How Do Credit Cards Work? Pros and Cons

Credit cards are essentially lines of credit that have low borrowing limits. If you own a business card but do not use it, you will only have to pay a small administration fee. However, if you pay for products or services using it, you will have to pay interest for what you borrow, provided that you do not return the money by the end of the month.


  • Borrow money whenever you need it – Credit cards can be used to pay for anything from electronic equipment to medical procedures. This gives you a fast way to borrow money in case of an emergency;
  • They can be affordable – If you make a habit of only borrowing what you can repay until the end of the month and do so religiously, you will be able to avoid having to pay interest, leaving you with only paying the affordable administration fee;
  • Paying for products and services can be advantageous – Many retailers have cashback offers for those who purchase their products and services using credit cards;


  • Using your credit card can damage your credit rating – Whenever you pay for something using your credit card, it is considered that you borrow money from the lender. If you use your credit card on a regular basis, your credit rating may drop;
  • Having an unpaid credit card can make it difficult to get loans – Most lenders will look at your credit utilisation ratio whenever you apply for a loan. This means that they will analyse how much you use of the money that is available to you through your credit card;

How Do Online Lending Services Work? Pros and Cons

Online lending services are somewhat new, but they are extremely popular. This is mainly because most of them do not report the loans that they give out to credit registers. In other words, you are able to borrow money without worrying that it will affect your credit rating.


  • Fast short-term loans – If you only need to borrow small amounts of money, you may be eligible for a next-day loan, enabling you to get the money in under 24 hours;
  • They do not affect your credit rating – Most online lenders do not report the loan that they offer, and they do not perform credit checks. This means that you are able to borrow money without having the loan affect your credit rating and you can do so even if you have a low credit score;


  • Higher interest rates – Online loans, especially next-day ones have higher rates than what you would be offered at a bank;
  • Lower borrowing limits – You will only be able to borrow up to £1,500 without having to go through the regular bureaucratic channels;

Which Is Better of the Two?

Both credit cards and online lending services are useful in their own right. However, each is designed for a different type of situation. The former is useful if you need money on a daily or weekly basis while the latter is a better option if you need larger sums of money that you can repay fast. In other words, credit cards are better for small purchases such as buying groceries, paying for transportation and bills, while online loans are only practical if you want or need to buy expensive products.

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