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Credit Cards - A Payday Loan Alternative

Many people hesitate to use a credit card because of the high interest rates. While credit card interest rates may seem high, a credit card is far less expensive than payday loans over a long period of time. If you need time to repay your loan, even the high interest on a credit card is a far lower Annual Percentage Rate (APR) than payday loans. Credit cards may charge as much as 17-20% Annual Percentage Rate, but an actual payday loan Annual Percentage Rate (the finance fee) can be anywhere in the range of 250-650%. Many credit cards have Annual Percentage Rates that are considerably lower, starting at around 9%. By comparison, a credit card will be a far better option for many consumers.

If your credit is good or if you haven’t yet established credit, using a credit card and keeping up the minimum payments will help build your credit. Payday lenders do not report your payment history. Since they rarely take into consideration whether or not you have good credit, your credit standing is not a concern to them. A credit card company will only provide you with their services if they believe you are a good customer that meets his or her financial obligations. Having a good credit rating will be helpful later on in life when larger loans are needed, for such things as a house mortgage or car loan.

If you take a payday loan, you will be charged a fee for the entire loan, even if you only end up spending some of it. When using a credit card, you can make purchases for the exact amount you need and you will be charged interest for that amount alone. For example, if you opt for a payday loan and borrow $200, you may get by using only $150. Whether you use $1 or the entire $200, the fee will be the same. With a $25 fee per each $100 borrowed, the $200 loan will cost you an extra $50 after 14 days, regardless of how much you use. Instead, if you make a purchase totaling $150 on your credit card, you will only pay interest for that amount. Should you repay the amount within 14 days, you will at most have to pay mere cents in interest. Some credit cards even allow a period of up to 40 days without charging interest. If you make a payment of $150 and pay within the 40 days, the loan will cost you nothing.

If you have great or even outstanding credit, you should have no problem getting a credit card with the lowest annual percentage rate possible. Shop around and get the annual percentage rate that you deserve.

* Payday Today is not a payday lender or broker. We provide research and information about payday lenders and products, and are not necessarily affiliated with the companies featured on this site. Availability of products and services varies by state. Not all independent lenders will approve you for a loan or can provide you with up to $1,000 on your first loan.


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