Credit Card vs Personal Loan: Which Costs Less?
A credit card is revolving credit: you can keep borrowing up to the limit. A personal loan is a fixed amount repaid over a fixed term. For debt that will take more than a few months to clear, the structure matters as much as the rate.
The main differences
| Credit card | Personal loan | |
|---|---|---|
| Structure | Revolving, reusable up to the limit | Lump sum, fixed term |
| Repayments | Minimum each month, more if you choose | Set amount each week, fortnight or month |
| End date | None unless you set one | Built in |
| Rate | Often 11% to 24% p.a.; 0% possible for a period | Varies with the lender and your credit history |
| Fees | Annual fee on many cards | Establishment and sometimes monthly fees |
Where a card tends to cost less
- Purchases you will repay in full within the interest-free period.
- Debt you can clear within a 0% balance transfer period, after allowing for the transfer fee. See how balance transfers work.
Where a loan tends to cost less
- A large amount that will take two or more years to repay.
- Debt on a high-rate card that isn’t going down.
- Situations where a fixed repayment and an end date are needed to make progress.
Consolidating card debt with a loan
Moneysmart lists moving card debt to a personal loan as one option for reducing costs. It works when:
- The loan’s rate and fees together cost less than the cards would.
- The cards are closed or their limits reduced afterwards. Otherwise the cards can fill up again alongside the loan.
- The loan term isn’t so long that the total interest ends up higher.
Comparing the two properly
Look at the total you will repay, not only the rate. Personal loans show a comparison rate that includes most fees. Moneysmart’s credit card calculator and personal loan calculator let you test your own numbers.
Related guides
Paying off credit card debt
Practical ways to clear credit card debt in Australia: choosing which card to pay first, raising repayments, balance transfers, loans and where to get free help.
Read the guideHow balance transfers work
How a 0% balance transfer works in Australia, what the transfer fee and revert rate cost, and a worked example of the repayments needed to clear the debt.
Read the guideMinimum repayments
How minimum repayments on Australian credit cards are calculated and how long a balance takes to clear when you pay only the minimum, with a worked example.
Read the guide