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Which is Better for the Holidays: Personal Loan or Credit Card?

Which is Better for the Holidays: Personal Loan or Credit Card?

With the holidays just around the corner, many people are worrying about how to pay for the holidays. Between gifts, travel, decor, and meals, the holiday budget can quickly spiral out of control.

To pay for it, many people rely on forms of debt, such as credit cards or personal loans. But which is better if you’re trying to save money? Continue reading to find out.

Using a credit card for holiday shopping

Credit cards are easy; you just carry plastic with you and swipe at the register. But there are some things you should keep in mind before turning to your credit card for your holiday spending.


  • Earn rewards: If you use a rewards credit card, you can earn cash back for every purchase you can make. You can then use that money as a statement credit to pay off a portion of your balance or use it to purchase some of the gifts on your list.
  • Revolving credit line: Credit cards give you flexibility. You can spend up to your credit line, and as you make payments, you can continue to use your card as needed.
  • Low monthly minimum: Credit cards tend to have low minimum payments: just 2% to 3% of your balance, giving you more wiggle room in your budget.
  • Low APR offers: If you have good to excellent credit, you can likely qualify for a card with a promotional APR of 0%, allowing you to pay off your purchases without worrying about interest.


  • High interest rates: Credit cards can have high interest rates; there are some with rates as high as 29.99%. With such a high rate, your balance can balloon over time.
  • No set payoff date: Because credit cards are a revolving form of credit, there’s no set payoff date. And if you continue using your card, you could end up paying off your debt for years.
  • Payments fluctuate: Because your minimum monthly payment is based on your balance, it can fluctuate over time, making it difficult to budget accordingly.

Using a personal loan for holiday shopping

While personal loans tend to take a little more work to get than credit cards, they can make sense for many users.


  • Set amount: With a personal loan, you borrow a set amount of money, such as $1,000. Once you’ve spent that money, you can’t get any more without applying for another loan, so it can help you control your spending.
  • Fixed payments: Personal loans have set repayment terms and fixed monthly payments, so you always know what your monthly bill will be.
  • Lower interest rate: Personal loans tend to have much lower interest rates than credit cards, so you can save money over time.


  • Can take years to pay off: Personal loans can have terms as long as 10 years. While opting for a longer repayment term may seem like a good idea since you’ll get a smaller monthly payment, you’ll pay much more in interest that way.
  • Can cause you debt to grow: If you’re juggling multiple forms of debt, adding a personal loan to the mix can just exacerbate the problem.

Financing the season

If you’re struggling to decide between taking out a personal loan and applying for a credit card, consider your personal information, such as your credit score. If you have good to excellent credit and plan to pay off your debt in a year or less, opting for a low-interest credit card or a 0% APR card makes more financial sense than a personal loan.

On the other hand, if you can’t qualify for a low-interest card or will need more than a year to pay off your debt, a personal loan might be a better option for you.

Going into the debt is never ideal. However, for many people, it’s a part of their reality. You can minimize the impact of your debt by thoughtfully considering what type to use to finance the holidays and by coming up with a repayment strategy that works for you and your budget.

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