Why do people choose Credit Cards over personal loans

[Anonymous]

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@Anonymous wrote:

I'm curious how a CR would look with only Personal Loans reporting? 20 Loans versus 20 CC would surey impact your score somehow.

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A credit report with 20 loans but no revolving accounts would be worse for you than one with 20 cards and no installment accounts.  That's true for a number of reasons.   It's much harder to build a high AAoA with only loans, whereas a credit card can be kept open forever (continuing to age) even if it often has a zero balance.  And a pure credit card profile could get all the scoring points from having:

        * Many open accounts with a zero balance

        * At least one revolving account with a positive balance

        * A total revolving utilization in the 1-8% range

whereas a pure loan profile would be denied all those points.

The good news of course is that nobody has to choose between all revolving or all installment.  Opening a few no-annual-fee major cards is easy to do and costs you nothing in interest.

[sarge12]

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@CreditGuy03 wrote:

Credit Cards don't seem like smart choices and ideas. 

If you use them you are penalized until you pay it down. They have high interest rates 24% I have seen. They can close you out at anytime without notice and you are stuck. They really affect your credit score profile more than anything other than lates and collections.

So why do people get them like they are gold?

A personal loan you can pay for what you want. It is billed as an installment on your credit and doesn't affect your profile as much as a credit card. You can purchase what you want and not be penalized for using the max of the loan. At the end of the day they both need to be paid off with use. Why not use the one that doesn't have such a negative impact?

Can someone explain this logic? Why don't people seek more personal loans rather than credit cards

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These two different forms of credit should be used differently. Installment loans should be obtained with lower interest for a major purchase like a house or car. Credit cards should be used mainly for convenience and rewards, and if used properly the interest rate on the card should be irrelevant, because you should always PIF. With SUB, and more enticing rewards I have amassed about 20 credit cards. Most are rarely used though after extracting the 200 dollar SUB bribe from them. Credit cards always make me money...every single one of them. Personal loans do not. If credit cards are not profitable for you, you are using them wrong. I make 500-1000 dollars off of cards every year. Many here make much more.