Credit Card vs. Personal Loan: Which Is More Affordable?

Whether it's paying for a holiday or Christmas gifts, Aussies are prone to reach for their credit cards when they need some extra cash.

According to data from the Reserve Bank of Australia and, the nation spent a total of $29.7 billion on credit cards in December 2018 alone, or $1,863 per person. This number is up $1.8 billion from the previous December.

Credit card use has increased by 46% over the past decade, while personal loans lag behind at just 17%, despite their lower costs overall. So why is Australia addicted to credit cards, and is a personal loan really better?

Personal loans

Unlike credit cards that can keep being extended for more debt, personal loans are an instalment debt. You know exactly how much you have to pay and how long you need to pay it. Personal loans are generally the better option for large or long-term expenses and they can have other advantages too.


  • Lower interest rates – the average interest rate for a personal loan is around 6 percentage points cheaper than interest on a credit card, meaning you'll pay less overall.
  • Higher loan limits – if you have a good credit rating, you can borrow more with a loan.
  • Consolidate debts – if you're struggling to pay off multiple debts, you could combine these into a more affordable monthly payment.


  • Fixed terms – you can't usually extend a personal loan like you can a credit card. If you need to borrow more money, you'll need to take out an additional loan.
  • Longer approval time – loans take longer to approve than a credit card. You may need to wait 24 hours or more to access the funds.

Credit cards

You should avoid using credit cards unless you have no other option, due to the high interest and charges you could face. If you do need to borrow money though, credit cards are better suited to smaller, everyday purchases that you should be able to pay off within the month, rather than bigger expenses that could build credit card debt.


  • Easy access – not everyone gets approved for a credit card, but they are generally easier to obtain than a loan, especially if you have a bad credit history.
  • Rewards – credit cards often tempt borrowers by offering cash rewards, frequent flyer miles or other bonuses the more they are used.
  • Balance transfers – a balance transfer credit card gives you the chance to pay off high-interest debt with 0% interest for a limited period. Some cards charge for this service.


  • Higher interest rates – credit cards usually have higher interest rates than loans, often in the double digits.
  • Lower credit limits – you may not be able to access large sums if you have a poor credit rating.
  • Pay more – if you don't pay off your credit card balance in full every month, or only pay the minimum, you will end up paying significantly more in the long term, and for more years.

Which option is right for you?

The choice between a personal loan or a credit card can depend on a number of factors, including the amount you want to borrow, how soon you plan to pay it back and your credit score. Talking to a financial advisor should help you to decide which borrowing option is the best fit for your circumstances, or they could help you to discover more alternatives.

Call Debt Fix's experts today on 1300 332 834 for confidential, no-obligation debt advice.