New Delhi: Paying for large amounts like an emergency medical bill with your credit card may seem like a very easy option but it can cost a lot with the kind of interest rates credit card companies charge on outstanding balances. The situation becomes even more difficult if only the monthly minimum payment is made to the credit card company because it is used to service the interest first and any amount left is used to service the principal.

Credit card companies charge a hefty interest rate which varies between 36-40% per annum, while personal loans come at interest rates between 12-23% depending on the credit worthiness of the borrower. People who have good repayment record with their credit card can avail a personal loan based on this criteria, most of the credit card issuers are more than willing to provide any such loan.

Though any such personal loan will come with around 2% processing fees and will have certain minimum requirements regarding the loan amount and prepayments but still the difference in interest rates charged on a personal loan and that on credit card balances is so huge that the former is a better option.

Other good options to fund some urgent financial requirements are taking loans against fixed deposits, gold or overdraft against mutual funds and blue-chip stocks. Such loans come at a very attractive interest rates which hover around 11%. The reason for the low interest rates on these loans is the security or collateral, which offsets any risks involved for the bank or lender.

Credit cards are definitely a good source of funds if you are able to repay the entire balance with the next monthly bill, that way you get an interest free amount and build good credit history for yourself. The monthly minimum payment, which most of the credit card customers shell out and feel comfortable that they have made the payments and avoided the late payment penalties is a really disastrous way to pay your credit card debt.