Refraining from Loans is Better off than Using Credit Cards

Refraining from Loans is Better off than Using Credit Cards

Personal borrowing involves the use of credit cards, loans or any other credit facility offered by financial institutions. Loans are advanced to individuals on a long-term basis to finance projects or an expense that requires a lot of money. On the other hand, credit cards are offered to facilitate people to purchase goods and services payable in the short run. Credit cards and loans attract charges from borrowers, but the former is expensive compared to the later. Thus, a person refraining from any loans is better off compared to one using credit cards.

Credit cards are the most expensive form of borrowing with an interest rate of above 10% because they are unsecured by collateral. Customers need to pay promptly at the end of every month failure to which they face additional charges and accruing interest. Credit cards encourage consumers to change their purchasing behaviours to their disadvantages (Fatayerji, 2004). In contrast, a person refraining from any loans does not incur cost out of the purchases one makes in a month. For a person without loans acquisitions are done within the budget which calls for the prudent use of resources to only the basic needs. This helps an individual to save finances for future use.

There are many risks associated with holding credit cards. Credit cards are a target for cyber criminals. The use of credit cards exposes an individual financial detail to a third party who can misuse the information to access funds unlawfully. Over the past years, people have recorded cases of financial fraud after shopping online (Latino Community Credit Union, 2013). In the case where credit cards are lost or stolen a person can make payments, buy goods or services to the disadvantage of the card holder. Credit cards are risky and can lead to huge lose of money. Though people also losses cash, the damage from a stolen or lost credit cards is enormous.

Credit cards have benefits that individuals refraining from loans cannot enjoy. Credit card owners enjoy discounts from specified chain stores and companies around the world. For instance, the majority of international airlines offer discounts to travellers using credit cards. Though this motive can be construed to encourage people to spend, the benefit is evident as persons are allowed to spend money that they do not have. A person using cash does not enjoy the discount and end up using more cash compared to credit cards holder. In all, a person refraining from loan has more benefit compared to a credit cards holder and is better off.

Credit cards are expansive to maintain because they charge high interest rates. For instance, they attract an interest of two-digit figure which is much high compared to other loans. Credit cards holder faces a threat of fraud from cybercriminals, as well as, from the risk of misplacing the cards. There have been enormous cases of fraud for online shoppers around the world. This is not the case for people refraining from any loans. Using one’s fund to finance purchases help a person to use resources prudently. Avoiding loans shapes a person behaviour to spend what one has and save part of it to finance future projects. A person using credit cards is worse off compared to a person refraining from any loans.




Fatayerji, N. (2004). Electronic marketing: Advantages and disadvantages. New York: Najib Fatayerji.

Latino Community Credit Union. (2013). Credit cards: Advantages and disadvantages. Retrieved from



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