by Alison Storm | 02/17/12

Online payday loans are a popular option for people who need help making ends meet. But some experts say before you apply for a payday advance, you should consider opening up a credit card instead. Credit cards are another option for a loan. They're relatively easy to access, and may offer a better financial move for people who are considering a payday loan.

Some experts say opening up a credit card can actually improve your credit history as long as you make payments on time. According to research from Credit-Land.com, when you compare options of a payday loan with a credit card for those with less-than-perfect credit. For instance, the typical interest rate on a cash advance from a credit card is 20%. The typical interest rate on a two-week payday loan is a little lower at 16%. At first that might seem like a better option but Michael Germanovsky from Credit-Land.com says when you compare the terms over a year you'll see that the payday loan becomes an APR of 416% while the credit card stays at 20%. "These types of loan situations only end up getting the consumer in more debt," Germanovsky says.

Payday loans are often required to be paid back within a couple of weeks in full, which is often difficult for consumer to do. "With the high interest rate on payday loans causing more debt accumulating each term, these consumers quickly fall into a circle of unpaid debt, sometimes resulting in bankruptcy," says Germanovsky. "Unfortunately, with payday loans, consumers are subject to random rates on their bill, penalty fees, and aggressive collection methods."