In the last year, everyday life has been different, and we have spent more time at home than before. Then it can easily be tempting with some changes. You may think that refurbishment is a big cost, which one has to save for or take out a loan to carry out. If it is a small job, or if you have a consumption plan, you can use a regular credit card instead. If you are also able to repay before the deadline, you will receive an interest-free loan.
Benefits of credit cards
Credit cards have a set limit for how much you can use per month. If you have a credit card with an interest-free period, you can get an interest-free loan if you pay back before the period is over. You also do not have to pay regular borrowing costs. In addition, most credit cards have usage benefits such as bonuses and discounts, and you have full control over the credit that is available.
- Many cards have an interest-free period
- Different benefits of use
- Does not require application or be approved for loan
- Do not pay other borrowing costs
- Direct overview and control of use and refund
It is normal to have an interest-free period of around 45 days. This means that you can get an interest-free loan, if you repay the amount within this period. But be aware that this normally only applies to purchases, and not transfers or cash withdrawals. Then the interest normally runs from the day the transfer or withdrawal is made. It is also important to note that a credit card usually has a higher interest rate than a consumer loan. This is something to keep in mind when using a credit card:
- Check the number of interest-free days
- Nominal interest rates only show interest free of charge
- Effective interest rates include all costs
- Cash withdrawals can incur interest
- Transfer can initiate interest
- After the interest-free period, interest rates run
Example credit card: 15.000 over 12 months, effective interest rate 17,1% ,, cost: 1.323, Total: 16.323
Credit cards or consumer loans
Before deciding whether to use a credit card or take out a loan, you need to find out how much you need to borrow. To get the most out of a credit card, it is wise to have a clear spending and repayment schedule. Without a plan, it can suddenly become much more expensive than other loans.
The website kredittkortinfo.no gives you an overview of several credit card providers in Norway. If you need a higher amount than the limit on your credit card, you have a number of other options; consumer loans, overdrafts, mortgages, the Housing Bank or start-up loans.
With a consumer loan, you can get an unsecured loan, but a credit check is performed. With account credit, you can overdraw your account an agreed amount each month. With a mortgage, you can get a loan with a mortgage on real estate. With the Housing Bank, you can get help from the state with a mortgage or support scheme. And with start-up loans, you can get help if you have been denied a mortgage.
Credit cards can be an advantage if you know you will get paid or holiday pay soon. Then you can quickly pay back within the interest-free period. If you have to repay over a longer period of time, you should choose another type of loan with a lower interest rate.
What is a nominal and effective interest rate?
A nominal interest rate is the annual interest rate you have to pay for a credit card, with no other fees. An effective interest rate is the nominal interest rate, plus fees and other costs such as set-up fees, annual fees, etc. Some credit cards, such as the card from re: member, has no annual fee. This differs from bank to bank, and also depends on the customer's credit history. Focus on the effective interest rate – that's the total amount you pay.
What is an unsecured loan?
A consumer loan, or an unsecured loan, is a loan where you do not have to provide security to the bank. Security can, for example, be a mortgage on a home or car. The credit history and your ability to repay are assessed. In addition, you must go through an application process, and pay the interest and fees specified in the agreement between you and the lender.
Should I opt for a credit card or apply for a home improvement loan?
It will depend on how much you need. Remember that renovations can suddenly cost more than expected. You have a selection of loan options that may suit you, and if you already have an ongoing loan, you can refinance that loan. However, if you have an effective plan and manage with the limits you are offered, you can save money with credit cards.