Both credit cards and loans can offer you access to money when you're in a pinch. However, they're not interchangeable. We find out which one is right for you.

You may be approved for a personal loan or credit card if you have a good credit score (Looking bright, 634-657).

How do credit cards work?

A credit card lets you spend money you don't have. Your credit card provider will set a credit limit, which could range from a few hundred rand or several thousands of rands. This is the maximum amount that you're able to borrow.

If you pay your bill in full each month, you won't be charged any interest on your borrowed money. But if you don't pay off the full balance, you'll be charged interest.

Lenders are not allowed to charge you more than the maximum interest rate set by the National Credit Act (NCA). For credit facilities such as credit cards, the cap is calculated as (repo rate × 2.2) + 10% per year. The interest rate and credit limit you'll be offered will depend on your credit score.

Browse your offers on ClearScore without harming your credit score. See your credit card deals.

Credit card repayments

Credit cards require you to settle the minimum repayment amount each month. While this is acceptable, you should try to pay more so that you can clear your debt sooner and pay less overall interest.

You can set up a direct debit order to settle the minimum repayment, which is a set amount, or you can manually settle the full bill each month.

How do personal loans work?

Personal loans can be used for larger purchases or to consolidate other debts. Loans can be as small as R2,000 or as large as R300,000, and lenders normally price loans in tiers.

Similar to credit cards, personal loans have a maximum interest rate. Lenders are not allowed to charge you more than the maximum interest rate set by the NCA. For unsecured credit transactions such as personal loans, the cap is calculated as (repo rate × 2.2) + 20% per year.

The interest rate and the loan amount you'll be offered will depend on your credit score. Log in to ClearScore to find out what your score is.

Personal loan repayments

Credit Card vs Personal Loan: Side-by-Side Comparison

If you're wondering which is better - a loan or credit card - the answer depends on what you need the money for, how much you want to borrow, and how quickly you can pay it back. The table below highlights the key differences at a glance.

Use this comparison as a starting point, then read on for guidance on which option suits your specific situation.

Unlike credit cards, there's no way to avoid paying interest on a personal loan. They have set monthly repayments over a period called the 'term'. The longer the term, the more interest you'll pay overall.

For example, if you borrow R10,000 at 7% over three years you'll pay a total of R1,100 in interest. If you borrow the same amount over 10 years, you'll pay R3,900 in interest.

When you take out a loan, the lender will tell you how much you need to pay each month. Make sure you're confident you can pay the required amount each month until the end of the term. If you miss a payment, you'll be charged a penalty fee and the default may reflect on your credit report.

You can pay off your loan early but you may be charged an early settlement penalty. This applies to loans over R250,000 or home loans, and it constitutes a payment of no more than three months' interest.

Browse market-related leading deals and exclusive offers on ClearScore (a credit broker, not a lender). See your loan deals.

When is a credit card better than a personal loan?

Credit cards are better than loans for regular spending and when you intend to borrow smaller amounts. They are also a good option if you're unsure how much money you need to borrow, or you need flexibility regarding repaying your debt.

You may want to opt for a credit card because of the membership rewards and cashback benefits. Many credit cards come with complimentary travel insurance, and some even offer monthly vouchers if you spend over a certain amount.

When you make a purchase with a credit card, you usually receive an interest-free period of 55 days. This means that if you repay the amount before the deadline, you won't have to pay any interest on it.

You can use credit cards abroad but you'll be charged a higher interest rate and additional fees. They are also a good backup in emergencies because it allows you immediate access to funds.

When is a personal loan better than a credit card?

How Does Choosing a Credit Card or Loan Affect Your Credit Score?

Your credit score determines whether you qualify for a credit card or personal loan - but the product you choose also shapes your score going forward. Understanding this two-way relationship helps you borrow strategically and protect your creditworthiness over time.

Credit utilisation ratio and why it matters for credit cards

Credit bureaux track how much of your available credit you actually use. This is called your credit utilisation ratio. If your card has a R20,000 limit and you carry a R15,000 balance, your utilisation is 75% - a red flag for lenders. Keeping utilisation below 30% signals responsible borrowing and can lift your score steadily. Because personal loans are instalment accounts rather than revolving credit, they don't factor into this ratio in the same way, which is one reason a credit card requires more careful balance management.

How on-time loan repayments build payment history

Payment history is the single biggest factor in your credit score. A personal loan with fixed monthly instalments makes it straightforward to build a strong track record - each on-time debit order counts in your favour. Credit cards offer the same benefit provided you at least meet the minimum repayment every month. Miss a payment on either product and you risk a default entry on your credit report, which can drag your score down for years.

Does applying for both at once hurt your score?

Every formal credit application triggers a hard enquiry on your credit report. One or two enquiries have a minor, short-lived impact, but submitting several applications in a short window can make you look credit-hungry and lower your score temporarily. If you need both a card and a loan, space the applications out by a few months where possible. You can browse offers on ClearScore without triggering a hard enquiry, so you'll know where you stand before you apply.

Should you cancel an unused credit card or keep it open?

Closing an old credit card reduces your total available credit, which can push your utilisation ratio higher and potentially lower your score. If the card has no annual fee, keeping it open - even if you rarely use it - generally works in your favour. However, if the card carries a fee you no longer want to pay, closing it and focusing on keeping balances low on your remaining accounts is a sensible trade-off. Review your overall credit position on ClearScore before making the call.

Frequently Asked Questions

Can I use a credit card and a personal loan at the same time?

Yes. Many South Africans hold both products simultaneously. A personal loan can cover a large, planned expense with structured repayments, while a credit card handles everyday purchases and emergencies. The key is to ensure your combined monthly repayments remain comfortably within your budget. Lenders will assess your total debt-to-income ratio when you apply, so carrying too much existing debt may affect approval.

What is the 2-3-4 rule for credit cards?

The 2-3-4 rule is a budgeting guideline sometimes recommended by financial advisers. It suggests keeping no more than two credit cards, ensuring your total credit card debt stays below three months' net salary, and never using more than 40% of your combined credit limit. Following this rule helps you manage your utilisation ratio and reduces the risk of over-indebtedness - both of which support a healthier credit score over time.

Is it easier to get approved for a credit card or a personal loan in South Africa?

Approval depends on your credit score, income, and existing debt rather than the product type alone. Entry-level credit cards sometimes have lower minimum income requirements than personal loans, making them slightly more accessible for first-time borrowers. However, each lender sets its own criteria. Checking your score and browsing personalised offers on ClearScore gives you a realistic picture of what you're likely to qualify for - without affecting your score.

Can I convert my credit card debt into a personal loan?

Yes - this is a common form of debt consolidation. You take out a personal loan to pay off your credit card balance, then repay the loan in fixed monthly instalments, often at a lower interest rate. This approach simplifies your finances and can reduce the total interest you pay. Just be sure to avoid running up new credit card debt once the balance is cleared, or you could end up worse off than before.

A personal loan is better than a credit card when you need to borrow a large amount of money and can make regular repayments. You can normally borrow more money with a loan than a credit card and - depending on the outcome of your credit application - at a lower interest rate.

If you meet all of your repayments, your loan will be repaid at the end of the term. In general, loans instil discipline as, unlike credit cards, you can't re-borrow the money you've repaid. However, it's important to note that you do have this option if you opt for a revolving loan.

Loans also don't have to be taken out exclusively over long periods. You can get a short-term loan and repay it over one to six months. This is a good option if you don't want to carry the debt long-term.