Credit card or cash loan: which is cheaper?
For small, short-term and recurring spending a credit card wins: within the grace period (usually 50–60 days) interest is zero. For a large one-off amount and a long term a cash loan is cheaper: the rate is lower and the schedule is fixed. Withdrawing cash from a credit card is the most expensive option.
The two products serve different purposes. A card is a revolving limit: you reuse it as you repay, it is interest-free within the grace period, but once the grace period ends the rate is higher than a cash loan's. A cash loan is a one-off amount with a lower rate charged from day one. Below we compare the real cost of both options for the same 2,000 AZN.
What you need
- 1 Card: grace period, annual fee, cash withdrawal commission and post-grace rate
- 2 Cash loan: effective annual rate, fee, insurance and schedule
- 3 For both: official income and a clean credit history
- 4 An honest assessment of your own payment discipline
Bank offers that fit this case
| Bank | Loan | Rate | Term | |
|---|---|---|---|---|
Rabitəbank
|
Nağd Pul Krediti | 10.5% | 48 mo. | Details |
Unibank
|
Nağd Kredit | 9% | 60 mo. | Details |
Yelo Bank
|
İstehlak Krediti | 8.9% | 59 mo. | Details |
|
Yelo Bank
|
Onlayn Kredit | 8.9% | 59 mo. | Details |
ATB Bank
|
ATB İstehlak Krediti | 12.5% dən başlayaraq% | 48 ayadək mo. | Details |
City Finance BOKT
|
İstehlak krediti | 20%-dən başlayaraq% | 24 ayadək mo. | Details |
Xalq Bank
|
Məvacib + | 12% | 59 mo. | Details |
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TBC Kredit BOKT
|
İstehlak Krediti | 18%-dən başlayaraq% | 36 ayadək mo. | Details |
Sample calculation
Estimated figures for 2 000 AZN over 12 months at ~8.9% effective rate. The exact number depends on the bank.
How to apply?
What to watch for?
- ✓ Take a card only if you are sure you can repay in full within the grace period; otherwise a cash loan is cheaper.
- ✓ Do not withdraw cash from a credit card: fee plus non-grace interest can exceed 40% effective annual rate.
- ✓ Instalment cards (0% split) are the cheapest option for store purchases, but only at partner stores.
- ✓ Choose a short term for a cash loan: 12 months means far less overpayment than 36.
Frequently asked questions
How does a credit card grace period work?
If you repay purchases from the statement period in full by the next due date, no interest is charged. If you pay partially, interest is usually charged on the whole amount from the purchase date.
Is a credit card good for building history?
Yes; small spending and full repayment is the cheapest way to build history. Constantly using more than 30% of the limit, however, hurts scoring.
Can I have a card and a cash loan at the same time?
Yes, but the card limit counts toward your debt burden and may reduce the cash loan amount.
Related questions
Suitable loan types
Useful links
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