You’ll need to update your browser so you can continue to log on to your online banking from 28th February. Update now.



Should you get a credit card or personal loan?

Should you get a credit card or personal loan?

For smaller amounts of money fast, a personal loan or a credit card can both be handy. We explain the differences between the two and why one may be a better option for you than the other.

In need of a trip overseas? Or perhaps your big day is drawing closer? There are many reasons you might need to borrow money, and for smaller amounts this means you’ll likely either be looking at taking out a personal loan or credit card.

So, what are the differences between the two? Well depending on your situation, one may work a lot better for you than the other. Here are a few things to think about before choosing the option that may best suit your needs.

Do you need to borrow?

This is the key question to ask before borrowing money. Think about whether you really need to make the purchase. If so, do you really need to make it now? Tools like a budget planner and setting a savings goal can help you make an informed decision. If it takes only a few months to save up and you don’t need to make the purchase right now, perhaps consider waiting it out for a bit.

How will you be spending?

With a credit card, you’re given a credit limit. You can spend up to your credit limit and are charged interest on what you’ve spent and not repaid within the billing period. By comparison, with a personal loan you're given the amount in a lump sum and charged interest on the whole amount.

If you’re wanting a bit of extra money in your pocket to help you manage your cash flow, a credit card may be more beneficial than a personal loan because provided you make your repayments on time, you’ll only have to repay what you’ve spent.

Credit cards are typically used for smaller purchases, say up to about $5,000, while personal loans tend to be used for items that cost more than this.

Interest rates

The interest rate will determine how much you have to repay each month. Check the interest rates of both credit cards and personal loans to see which offers you the best deal. With a personal loan you can lock in an interest rate through a Fixed Rate Loan, so you’ll know exactly how much you’ll be repaying each month and also over the entire term of the loan.


How do you want to make your repayments? A personal loan will require you to pay back a certain amount each month over a set period of time, typically between one and seven years. If you know you’ll find managing your repayments with your cash flow a little difficult, the structure of a personal loan may be more suitable for you as it has a clear repayment schedule.

Both a Variable Rate Personal Loan and a credit card give you a bit more flexibility with repayments, as you can pay as much off as much as you like above the minimum repayment, whenever you like, and reduce the amount of interest you’re paying.

Before taking out either a personal loan or a credit card, be sure you’ll be able to meet the repayments for the amount of money you would like to borrow.  Creating a budget can help you figure this out as well as help you manage your money on an ongoing basis.

Fees and charges

Outside of interest, there are some fees and charges you’ll have to pay when borrowing. A personal loan may have a fee to take out the loan and, if you have a Fixed Rate personal loan, it may also have fees should you try to pay the loan back before the agreed time period or when making extra repayments. A credit card typically has an annual fee and a fee associated with withdrawing cash. Make sure you take a close look at all the fees and charges before you borrow.

Other benefits

The main benefit of either a credit card or personal loan is that you’re able to borrow the money you need, when you need it. But some credit cards also come with the ability to earn awards points when spending that you can put towards other purchases or redeem for something you want.

Personal loans, on the other hand, may potentially be funded on the same day that you apply, a big help if you really need the cash quickly.

You can easily manage either your credit card or personal loan through NetBank or the CommBank app. It’s important to stay on top of your balance and repayments if you do borrow money.

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. You should consider seeking independent financial advice before making any decision based on this information.