Loan vs Credit Card Interest — Which Is Cheaper?

When borrowing money, the cost you pay is interest. Loans and credit cards calculate it differently. Understanding the difference can save you real money.

How Loans Calculate Interest

Most installment loans use amortization: fixed monthly payments over a set term. Your payment covers both principal and interest.

How Credit Cards Calculate Interest

Credit cards typically compound interest daily on your average daily balance. Carrying a balance can get expensive fast.

APR vs APY

APR is the yearly rate without compounding; APY includes compounding. Credit cards feel expensive because compounding happens frequently.

Run the Numbers

Compare a personal loan to a credit card by estimating payments and total interest. Try our Loan & ROI Calculator to see monthly payments and total interest for a loan.

More tools: ROI & Loan Calculator