Holiday Shopping – Credit Cards vs. Personal Loans

When you think of the holidays, you probably think of family traditions, your favorite Christmas movies, spending time with the people you love… and all of the things you’ll have to budget for. Between gifts, travel, special events, groceries, and all your usual expenses, managing your finances during the holidays can be stressful. But for some situations, a credit card or a personal loan can be useful tools for covering your holiday spending without dipping into your savings. 

So how do you figure out which is best for your personal needs? Credit cards and personal loans serve different purposes, so it’s important to understand how each of them is used and what fits your financial situation. 

Keep reading to learn a little more about both and see which one might be a good fit for your holiday spending! 

Credit Cards 

Credit cards offer revolving credit, which means that you borrow money as you need it, up to a spending limit set by the lender (known as your credit limit). You’ll then make monthly payments on your outstanding balance, with a minimum payment usually around 2% to 4% of that balance.  

Credit cards can be a great tool for holiday spending, especially with perks like cash back or redeemable rewards points. (If you’re consistent about paying off your balance in full each month, you can skip the interest altogether!) Sounds nice, right? Arkansas Federal’s credit cards even offer low APRs and $0 annual fees, so you can shop without having to worry about the high rates and extra costs that come with other cards.  Just keep in mind that it can be easy to overspend when you’re swiping now and thinking about paying later, so a little planning can go a long way in keeping your spending in check. 

When to use a credit card 

Credit cards work best for smaller everyday expenses – things like gas, groceries, or stocking stuffers – or if you’re not sure exactly how much you’ll need to spend and want some flexibility in your budget. If you’re in a place where you can comfortably pay off your balance each month, credit cards can help you spread purchases out over time instead of having to pay them in full upfront. 

If you qualify for a card with a low APR or introductory rate, the holidays can be a good time to take advantage of cards with low rates, like Arkansas Federal’s Low-Rate Credit Card. You can even use your rewards points to cash in on travel vouchers with cards like our 2% Cash Back Credit Card, which can help you save on your holiday travel expenses.  

Personal Loans 

Unlike the revolving credit you get with a credit card, a personal loan gives you a set amount of cash in a lump sum. You’ll pay it back in even installments at a set interest rate until your balance is paid off. Personal loans can be a smart option if you know exactly how much you need for holiday expenses, and you want the predictability of a fixed payment schedule. Plus, personal loans typically come with lower interest rates than credit cards. 

A personal loan can be a longer term commitment, so it’s important to make sure that the loan amount and repayment timeline fit your overall financial situation. The good news? If you’re able to pay your Arkansas Federal personal loan off early, there’s no penalty.   

When to use a personal loan 

A personal loan can be a good option for larger, one-time expenses. Really, they can be used for almost anything, with higher education being one of the only spending restrictions. If you have a set budget, like you might for your holiday expenses, a personal loan can help you spread the payments for that budget out over a longer period of time. 

If you qualify for a personal loan with a low interest rate, it could be a good option for holiday spending without breaking the bank. Arkansas Federal offers personal loans at competitive low rates with varying loan terms, so you can borrow on terms that fit your financial situation. Just make sure you’re comfortable with the repayment schedule, since you’ll still be making those payments once the holidays are over. 

Which Option is Right for You? 

Choosing between a credit card and a personal loan boils down to your holiday spending habits and financial goals. If you’re planning to make smaller purchases and can pay off your balance quickly, a credit card might be your best option. But if you’re looking at bigger expenses and want the stability of fixed payments, a personal loan may be a better fit for you. 

No matter which option you choose, it’s important to have a solid plan in place to manage your spending and keep your finances on track so you can focus on enjoying the season without worrying about financial stress. Arkansas Federal offers both personal loans and credit cards with options to fit your budget – get in touch today to learn more.