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Topic	What Are The Big Differences Between Credit Cards And Loans?
Soviet_Poland 04/30/18 8:23:31 PM #6:	Different credit cards are intended for different uses. For example, some cards are 0% APR for a promotional period (usually 12 to 15 months). What this means is that as long as you make the minimum payment, you get charged no interest for those 12 or so months. The advantage of something like this is when you have an unexpected expense and can't afford it upfront, but you know if you budget accordingly, you can pay it off within that time frame. So say you have a medical expense of 2k you weren't expecting. But you can tighten your budget to free up $167 per month and basically put that towards the 2k. You pay it off in full before the period ends and all is well. The danger comes in if you can't pay it off in time. Once the promotional period ends, whatever APR you qualified for is now the interest rate. So if you negligently charge 2k on a sick ass curved 4k TV and don't do anything but the minimum payments the entire time, suddenly you're now with 1,500 left on a card that charges 15% per month, or $225. That can get dicey to climb out of. Other cards don't have a promotional 0% period, but have great rewards points. Those cards give you 2-5x cash back, or accumulate airline miles, or otherwise are just really good at charging regular monthly expenses. Charge your groceries, gas, utilities (that allow it) every month on it and pay it off in full. You don't get charged any interest, and you'll get more in points than you would from a debit card. The added incentive is adding an extra layer between your liquid cash/debit account for fraud protection. As long as you don't splurge on things you can't afford, there is no harm in using them and you only stand to benefit. Loans are a different story entirely. Usually they are for larger expenses (cars, homes, businesses, education) and are more simple. Borrow a total amount, pay it off over an agreed amount of time, plus interest. The interest is usually more favorable than credit cards (presuming you carry a balance on a credit card). This benefit is moot if you don't carry a balance on a credit card. If you don't have a particular reason for a loan, there is no reason to get one just to have cash on hand since you're paying interest. But, if you need to finance a car or pay for your college, often people don't have any other way. --- https://imgs.xkcd.com/comics/duty_calls.png <cite>Soviet_Poland posted [p:900589751] in What Are T... [t:76567428]...</cite> <quote>Different credit cards are intended for different uses. For example, some cards are 0% APR for a promotional period (usually 12 to 15 months). What this means is that as long as you make the minimum payment, you get charged no interest for those 12 or so months. The advantage of something like this is when you have an unexpected expense and can't afford it upfront, but you know if you budget accordingly, you can pay it off within that time frame. So say you have a medical expense of 2k you weren't expecting. But you can tighten your budget to free up $167 per month and basically put that towards the 2k. You pay it off in full before the period ends and all is well. The danger comes in if you can't pay it off in time. Once the promotional period ends, whatever APR you qualified for is now the interest rate. So if you negligently charge 2k on a sick ass curved 4k TV and don't do anything but the minimum payments the entire time, suddenly you're now with 1,500 left on a card that charges 15% per month, or $225. That can get dicey to climb out of. Other cards don't have a promotional 0% period, but have great rewards points. Those cards give you 2-5x cash back, or accumulate airline miles, or otherwise are just really good at charging regular monthly expenses. Charge your groceries, gas, utilities (that allow it) every month on it and pay it off in full. You don't get charged any interest, and you'll get more in points than you would from a debit card. The added incentive is adding an extra layer between your liquid cash/debit account for fraud protection. As long as you don't splurge on things you can't afford, there is no harm in using them and you only stand to benefit. Loans are a different story entirely. Usually they are for larger expenses (cars, homes, businesses, education) and are more simple. Borrow a total amount, pay it off over an agreed amount of time, plus interest. The interest is usually more favorable than credit cards (presuming you carry a balance on a credit card). This benefit is moot if you don't carry a balance on a credit card. If you don't have a particular reason for a loan, there is no reason to get one just to have cash on hand since you're paying interest. But, if you need to finance a car or pay for your college, often people don't have any other way. --- https://imgs.xkcd.com/comics/duty_calls.png</quote> ... Copied to Clipboard!
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