Should You Use A Credit Card Or A Payday Loan For Unexpected Expenses?

It never fails

It never fails. When things seem to be going well and you are paying your bills on time every month, something happens out of the blue that causes you to come up short in the budget. It could be that you needed to get new tires for your car because you had stretched the old ones as far as they could go. Maybe you got injured on the job and need to pay for medical care. Most of the time it is a bill that was missed the previous month that must be paid to prevent undesirable consequences. In these situations, you may be deciding if it is better to use your credit card or to get a payday loan.

Most credit card companies allow you to withdraw cash from your line of credit just like you would from a checking account. They usually charge a fee for this courtesy and the amount you take is added to your monthly balance. A payday loan, on the other hand, is a cash loan provided to you by specialty lenders. The money is a cash advance, of sorts, against your next paycheck. They give you cash today and you write a post dated check that is used to withdraw money from your account on your next pay date.

There are a variety of factors that determine whether or not you use a credit card or a payday loan or your short term cash crunches. The two major factors that you should consider are how much money you need and when you are able to pay it off. Many credit card companies limit the amount of money you can withdraw from your card. If you need $500 but your bank only allows you to withdraw $200 cash or your total credit limit doesn't cover it, then you still need to make up the shortage in some way. Since a payday loan is based on your income, you have a better chance of getting the amount you need as long as you make enough money.

Payday loans are usually due within two weeks of receiving the money. If you fully plan on paying the loan back on your next payday, then a short term loan is probably the cheapest option. This is mostly because when you take out a cash advance on your credit card, you may not pay it back right away and end up accruing outrageous interest charges. Take a look at the pros and cons of each option and decide on the best one for your unique situation.

by: Troy Truman

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