Can a credit card be a payday loan alternative?
This depends on the type of credit card and the interest rate. Generally, credit cards come with a lower rate of interest in comparison to a payday loan. Your eligibility for a credit card will be influenced by your credit rating. If you have bad credit, you may find yourself ineligible for a credit card from many credit card providers. Though many providers offer an eligibility check which provides an indicator if you’ll be accepted or not without affecting your credit rating. So, on the basis of a potentially lower APR, a credit card can be an alternative.
A credit card from 118 118 Money may be a better option to fit your short-term cash flow needs than borrowing from payday lenders. If you take out a credit card with us and repay your full balance within 51 days, by the payment due date, it will be interest-free. If on the other hand, you do need to stretch your payments beyond 51 days, you’ll pay the interest rate set on your credit card. It should be noted that if you decide not to pay off your balance in full within 51 days, and you want to repay over a few months or more, you will still need to make the minimum repayment due by the payment due date, every month.
If you do take a credit card, the APR on our credit card is lower than that on traditional payday loans. You’ll also benefit from the fact that there are no hidden fees or charges with a credit card from 118 118 Money; but you should be aware that third party vendors may have their own charges such as cash machine charges which charge you to use them.
Remember, 118 118 Money are not a payday loan company.
Don’t just take our word for it. If you’re interested in an alternative to a payday loan, our Trustpilot score is a good indication of how our customers feel about us – currently 4.8 stars out of 5 based on real customer reviews. (January 2021)
What are the differences between a payday loan and a credit card?
A payday loan is a very high-cost, short term type of lending. A credit card isn’t. Repayments on a payday loan are usually weekly or monthly until the balance is paid. When the repayment on a credit card is due, you can either repay the full balance, the minimum monthly repayment or a fixed amount of your choice in between. If you pay the balance, you won’t be charged any interest for that month. If you’re repaying the minimum monthly amount, then the balance is carried over to the next month plus the interest fees.
A credit card is also a revolving line of credit, which means the borrower can use at their discretion within the agreed credit limit (lender terms and conditions apply). Unlike a payday loan which is a singular arrangement, and once the loan is repaid, the agreement ceases.
Credit cards, payday loans and bad credit.
If you have bad or less than perfect credit, you may think a payday loan is your only option. It isn’t. Your credit history is one of several factors lenders look at as part of your application for credit, and there are lenders who consider applications from those with an imperfect credit background, including 118 118 Money.
Whether you’re looking at loans or credit cards, it’s good practice to use comparison websites to understand what different lenders provide. Remember, many providers have the eligibility check option. You can use this as an indicator to see if you’ll be accepted. If you find a personal loan or credit card with a more competitive rate of interest than a payday lender, using the eligibility checker can help you determine whether this may be a cheaper alternative. Terms, conditions and acceptance criteria may differ from lender to lender and your own circumstances, like whether you're employed or self-employed will all have some bearing on which is a better option. So bear all this in mind.
If you are considering a payday loan, just be aware that there may be other options available to you.
What is a credit check and will 118 118 Money do one?
A check on your credit history is done to look at your repayment behaviour, to see how much credit you currently have, and if you usually make your payments on time. It gives lenders a view on whether or not you meet their lending criteria. Credit checks are not only carried out by lenders during credit card or loan applications, but also carried out when you apply for a new utility supplier, a new mobile phone contract, or even a new letting agent or landlord.
You can sign up with a company which compiles credit reports to see what your own credit score looks like, before you apply for any new products. It is important to regularly check your credit file to make sure there are no inaccuracies. More information can be found on our loan tips ‘check my credit report’ page.
When you apply for a credit card from 118 118 Money a credit check will be done when you complete the full application. However, you can see if you’ll be accepted before you apply with our eligibility check for credit cards – this won’t affect your credit rating.
What if I need to check my credit card balance or have a question?
A benefit you’ll have when taking out a credit card from 118 118 Money as an alternative to a payday loan, is being able to manage your account or app whenever you want to.
If you do need to speak to us about anything at all, our Customer Service team are available from 8am – 7pm Monday – Saturday, 9am – 5pm on Sundays and Bank Holidays. You can reach them on 08000 118 222.