When it comes to paying for goods and services, consumers have more borrowing options than ever. These options typically fall within two categories: credit cards and installment loans.
So which type of financing is better? The answer depends on the situation.
Credit cards are often considered better for smaller everyday purchases that can be repaid quickly. But when it comes to larger one-off expenses, like those your customers are often making when paying for a job, an installment loan can be the better choice if it’s through the right company. (For instance, one that qualifies its borrowers in seconds via a soft credit pull and pays their merchants as soon as the job is completed. #shamelessplug)
Explaining this to customers who may not fully understand the difference between the two can help them pick a payment option that’s better for them, ultimately making them happier customers. Below, we break down both options in more detail to better help you educate your customers.
Credit cards are a type of revolving credit, which means you can use them to borrow repeatedly. Unlike loans, which give you a lump sum up front, each credit card comes with a credit limit, which is basically a pool of money you can borrow from.
Credit cards are a convenient way to pay for small, everyday expenses that can be paid off quickly — a key reason Americans collectively hold over one billion credit cards. However, due to their frequently high interest rates, they may not be the best option when borrowing larger sums of money that a consumer can’t pay back in one billing cycle.
Installment loans, like some of the options from Wisetack, allow consumers to borrow a set amount of money as a lump sum and pay it off in fixed payments over a set amount of time.
Thanks to lower interest rates and the predictable payments they offer customers, installment loans are usually better for larger one-off purchases that a consumer may not choose to pay off all at once, such as medical, automotive, or home services.
According to a 2019 study from Experian, 45% of consumers used financing for this purpose. The next most popular use case: consolidating debt, which makes sense, as financing options often have lower rates than credit cards on average.
Some of your customers may view credit cards and installment loans as comparable borrowing options, not realizing they are each best suited for a different purpose. They may be debating between the two or even leaning toward using a credit card when it comes to paying for a bigger job. This is when you can step in and educate them.
Using the pros and cons we listed for each, you can show them that while credit cards are often ideal for smaller everyday purchases, an installment loan can be better for bigger purchases that take time to pay off — like the services you provide.
But of course, not all installment loans options are created equal, so it’s important for consumers to understand what they’re signing up for before committing. Some come with a ton of hidden costs, while others, like Wisetack, strive to offer consumer-friendly financing with quick decisions that don’t affect credit, no hidden fees, and ARPs that start at 0%* for qualified customers.
If you’re interested in learning how to give your customers transparent and consumer-friendly financing options to help them afford the services they care about, reach out and we’d love to chat.
*All financing is subject to credit approval. Your terms may vary. Payment options through Wisetack are provided by our lending partners. For example, a $1,000 purchase could cost $45.18 a month for 24 months, based on a 7.9% APR, or $333.33 a month for 3 months, based on a 0% APR. See additional terms at http://wisetack.com/faqs.
When it comes to paying for goods and services, consumers have more borrowing options than ever. These options typically fall within two categories: credit cards and installment loans.
So which type of financing is better? The answer depends on the situation.
Credit cards are often considered better for smaller everyday purchases that can be repaid quickly. But when it comes to larger one-off expenses, like those your customers are often making when paying for a job, an installment loan can be the better choice if it’s through the right company. (For instance, one that qualifies its borrowers in seconds via a soft credit pull and pays their merchants as soon as the job is completed. #shamelessplug)
Explaining this to customers who may not fully understand the difference between the two can help them pick a payment option that’s better for them, ultimately making them happier customers. Below, we break down both options in more detail to better help you educate your customers.
Credit cards are a type of revolving credit, which means you can use them to borrow repeatedly. Unlike loans, which give you a lump sum up front, each credit card comes with a credit limit, which is basically a pool of money you can borrow from.
When and when not to use them:
Credit cards are a convenient way to pay for small, everyday expenses that can be paid off quickly — a key reason Americans collectively hold over one billion credit cards. However, due to their frequently high interest rates, they may not be the best option when borrowing larger sums of money that a consumer can’t pay back in one billing cycle.
Benefits
Drawbacks
Installment loans, like some of the options from Wisetack, allow consumers to borrow a set amount of money as a lump sum and pay it off in fixed payments over a set amount of time.
When and when not to use them:
Thanks to lower interest rates and the predictable payments they offer customers, installment loans are usually better for larger one-off purchases that a consumer may not choose to pay off all at once, such as medical, automotive, or home services.
According to a 2019 study from Experian, 45% of consumers used financing for this purpose. The next most popular use case: consolidating debt, which makes sense, as financing options often have lower rates than credit cards on average.
Benefits
Drawbacks
Some of your customers may view credit cards and installment loans as comparable borrowing options, not realizing they are each best suited for a different purpose. They may be debating between the two or even leaning toward using a credit card when it comes to paying for a bigger job. This is when you can step in and educate them.
Using the pros and cons we listed for each, you can show them that while credit cards are often ideal for smaller everyday purchases, an installment loan can be better for bigger purchases that take time to pay off — like the services you provide.
But of course, not all installment loans options are created equal, so it’s important for consumers to understand what they’re signing up for before committing. Some come with a ton of hidden costs, while others, like Wisetack, strive to offer consumer-friendly financing with quick decisions that don’t affect credit, no hidden fees, and ARPs that start at 0%* for qualified customers.
If you’re interested in learning how to give your customers transparent and consumer-friendly financing options to help them afford the services they care about, reach out and we’d love to chat.
*All financing is subject to credit approval. Your terms may vary. Payment options through Wisetack are provided by our lending partners. For example, a $1,000 purchase could cost $45.18 a month for 24 months, based on a 7.9% APR, or $333.33 a month for 3 months, based on a 0% APR. See additional terms at http://wisetack.com/faqs.