Subscribe to Our Newsletter

We know you love savings. Sign up for more!

Credit Cards VS Personal Loans. Which Is Better For You?

BY Team Loanstreet

Updated 19 Oct 2018

Many of us own a credit card(s) or even have a personal loan, but do we know enough about it? This article is to help consumers find out more about credit cards and personal loans and familiarise them with the pros and cons of each in order to make wise decisions when thinking of getting a new credit card or a personal loan.

What's covered in this article?



A credit card can be used as a substitute to cash and saves you the trouble of constantly having to go to a bank/ATM. It can also be used overseas thus relieving you from the inconvenience of having to find a money changer or carrying large amounts of cash in an unfamiliar territory. Usable online anytime with a wide variety of local shops accepting the usage of credit cards. In addition to being able to pay monthly recurring bills by auto-debit, making it hassle-free. It can also be used to book hotels and car rentals conveniently. Main applicants can even get a supplementary card for someone who can’t get a credit card themselves.

Personal loans are multipurpose with flexibility on what it can be used on. The amount is relatively higher than most credit cards’ credit limit and it can be negotiable in addition to being able to receive the money as a lump sum. A personal loan only needs a minimal amount of documentation. It also does not require a collateral nor a guarantor, which makes it quickly available. Since it does not need a collateral, you would not face property risk when you are unable to repay the loan. Moreover, you do not need to go through the trouble of finding a guarantor for your debt.

If you’re looking for something that is convenient to use anytime anywhere, for any purpose, a credit card would be a better choice. Personal loans on the other hand, would be a better choice if you want a lump sum of cash and when you already have a purpose for it. Personal loans are more of a ‘one-time loan’  whereas a credit card can be used until it’s cancelled.

Financially Beneficial

Credit cards help build up your credit score. As credit card issuers usually provide a credit limit that’s double your monthly salary, it gives you the opportunity to buy items that are relatively expensive and pay them in monthly instalments instead of paying in bulk. These monthly instalments often come with low interest rates or it might even be interest free! You can also purchase things or pay your bills when you don’t have the cash yet. A credit card is a form of financial backup in times of need.

A personal loan could help you increase your creditworthiness when you pay on time. Commonly, personal loans would be used to pay for a car’s deposit or home renovations. Personal loans give people easy access to things they temporarily are not able to. For example, a person who has a full time job but do not have enough savings to open their side business, could get a personal loan to fund it.

Both could offer debt consolidation, build credit scores, give you access to things and are financial backups but credit cards often have a smaller credit limit and higher interest rates when compared to personal loans.

Rewards and Savings

A credit card allows you to earn points and claim rewards just by using it. You can also get special discounts from different retailers, restaurants and hotels. There are different types of credit cards; one example is the cashback credit card, it gives you rebates on certain things that you spend on (e.g. fuel, groceries). Frequent flyers may be more interested in a travel credit card that gives special access to premium airport lounges and points that can be used to redeem free/cheaper flights.

Personal loans could help you manage several of your debts by consolidating it into one personal loan. As the loan comes in monthly instalments, the interest rate and length of loan is fixed so it could possibly lower the total payments you have to pay by consolidating it. For certain types of personal loan, if you let them auto-debit your bank account for your loan payments, you may be eligible to get more attractive rates. You could top up a personal loan in the future if you like to and take advantage of better rates.

While credit cards and personal loans helps you in the form of giving back, they are through different methods. Credit cards are more towards giving rewards and personal loan helps you save some money by paying potentially lower interest.


The credit card’s customer service hotline is open 24 hours a day in case assistance is needed. Once you report that your card has been stolen, you will not be held liable for the purchases made by the thief because of the zero liability policy. The same can’t be said for cash as once it’s been stolen, it’s gone for good. Credit card companies in Malaysia often send a code number to your phone which you have to manually key in on the site before allowing the transaction to be approved when making purchases online. This process ensures that others aren’t fraudulently using your card.

Personal loans that are approved are often wirelessly transferred to your bank account and hence there is no risk of losing the cash. However one should be extremely careful when making a payment in cash.


Credit cards’ overdue bills tend to have really high interest rates and could lead to a bad credit score. Certain credit cards also charge high fees. Due to high credit limit given, people may spend beyond their means and develop unhealthy spending habits. Users are also exposed to credit card frauds.

Due to the absence of guarantor or collaterals, personal loans are considered to be riskier for lenders and hence their interest rates would be higher than most housing and car loans. Some personal loans have lock in period and does not allow prepayment or you may have to pay penalty for it. This could lead to unnecessary excess payments.  


Credit cards are often more suitable for a smaller amounts and everyday use. Personal loans offer relatively higher amounts and are a fixed term-structured product. In conclusion, credit cards and personal loans have different uses and various pros and cons. To decide on what’s best for you, you should think about the goal you want to achieve by getting a credit card or personal loan.

Continue reading...

About the Author

Team Loanstreet

Run by a professional human-sized team, get resourceful tips & guides from our very own library of financial articles that can help improve your financial lifestyle & make a well-informed money decision. We strive to provide you with the best service in helping you to get the most out of that DUIT!


Suggested Articles

Here are the Best Fixed Deposit Promos in Malaysia 2023

Best Fixed Deposit Promos Malaysia 2024

Got Damaged Ringgit Banknotes/Coins? Don't Throw, Can Exchange

How to Exchange Damaged Ringgit Malaysia Banknotes?

3 Big Reasons Why You Should Get UOB TMRW