If you find yourself in a situation where you need a little financial help, take time to think about your options. Automatically reaching for a credit card — or applying for a personal loan — might not be the best money move.
According to the Federal Reserve, consumer debt increased $12.3 billion month over month in July 2020. Interestingly, revolving debt, which includes credit card debt, decreased about $300 million. But nonrevolving debt, which includes personal loans, grew by $12.6 billion.
Bottom line: If you have debt or are facing an expensive but necessary purchase, you can choose how you want to attack the debt. Your goal is to minimize the risk of making your debt worse than it already is. Make the right choice, and before you know it, you’ll be on your way to fiscal sanity again.
So let’s take a look at how to decide whether you need a credit card or a personal loan for your debt situation. Keep reading , and here’s what you’ll learn:
— When to use a credit card.
— Pros and cons of credit cards.
— When to use a personal loan.
— Pros and cons of personal loans.
— What if you need to consolidate debt?
When to Use a Credit Card
Several years ago, I had a giant hole in my kitchen ceiling. It was the unfortunate result of a leaking roof and a monsoonlike storm that lasted for five days.
The bill for this fiasco? A cool $16,000. I was fortunate to have an emergency fund and a credit card with a ridiculously low annual percentage rate (the perks of having a long, currently drama-free credit history). It was going to take my insurer some time to approve the coverage, and I needed to fix the roof before