Published: 4th June, 2025
Last Updated:16th March, 2026
Author: Murray Greig 2025/06/04
Key Takeaways
- Credit cards in New Zealand typically charge purchase interest rates around 20%–22% per year.
- Personal loans often have lower interest rates and fixed repayment terms.
- Credit cards use revolving credit, which can extend repayment periods for many years.
- Personal loans are fixed-term installment loans, meaning borrowers know the total repayment cost upfront.
- For larger balances or long repayment periods, personal loans frequently result in lower total borrowing costs.
Although both allow you to borrow money, they operate very differently. Those differences can significantly affect how much interest you pay over time.
How Do Credit Cards Work?
Credit cards let you borrow money up to a certain limit. You can use the card as often as you like, as long as you don’t go over your credit limit. Each month, you get a statement showing how much you owe and the minimum payment.
The catch? If you don’t pay the full balance, you get charged interest — and in New Zealand, that interest isn’t cheap.
Common NZ Credit Card Rates
According to the interest.co.nz credit card comparison tool, the standard purchase interest rates in NZ are typically around 20% – 22% per annum, depending on the card type and provider.
But what does that actually mean? Here’s an example.
Paying off a $2,000 ANZ or Westpac standard Visa or Mastercard by making only the minimum payment will take 16 years and result in $4,404 in total payments!
That’s a decent chunk of change. But would you fare any better with a personal loan instead?
How Do Personal Loans Work?
Personal loans are typically fixed-term, fixed-rate loans. That means you borrow a set amount, repay it over an agreed term (say 2–5 years), and know exactly how much you’ll pay each week or month.
Loansmart, for instance, offers unsecured personal loans with rates starting from 11.95% p.a. — much lower than most credit cards.
You can borrow up to $75,000 unsecured (or $150,000 secured), with terms from 6 to 84 months, and repayments as low as $68 per week for a $10,000 loan.
Let’s take a side-by-side look at how credit cards compare to personal loans.
Credit Cards vs Personal Loans: Cost Comparison
| Feature | Credit Cards | Personal Loans |
|---|---|---|
|
Typical Interest Rate |
20–22% p.a. |
Often lower, sometimes from ~9.95% p.a.
|
|
Repayment Structure
|
Minimum monthly payment
|
Fixed weekly, fortnightly, or monthly repayments
|
|
Loan Term |
Revolving credit with no fixed end date
|
Fixed term (usually 6–84 months)
|
|
Interest Accumulation |
Compounding if balance carried
|
Calculated over fixed schedule
|
|
Cost Predictability |
Harder to track long-term cost
|
Total repayment known upfront
|
|
Best User
|
Small purchases or short-term spending
|
Larger purchases or debt consolidation
|
Example Comparison: Credit Card vs Personal Loan
Using the earlier example:
Credit Card Scenario
- Balance: $2,000
- Typical interest rate: 20%
- Minimum repayments only
- Repayment time: 16 years
- Total repayment: $4,404
Personal Loan Scenario
If the same $2,000 balance is replaced with a 2-year personal loan at approximately 12.95% interest:
- Weekly repayment: about $28
- Total repayment: about $2,928
This represents a potential saving of approximately $1,476 compared with carrying the balance on a credit card.
Want to do your own calculation? Try our free online loan calculator.
Why Personal Loans Often Cost Less Over Time
Here’s why personal loans usually win in the long run:
- Lower interest rates (especially for people with good credit)
- Fixed terms so you know exactly when you’ll be debt-free
- Structured repayments that stop you from digging a deeper hole
- No revolving credit means you can’t re-spend what you’ve paid off
You can get a personal loan from a bank, but a smarter option is to choose a loan broker like Loansmart. As a broker, we can help you compare offers from multiple lenders so you can get the best rate possible — even if your credit isn’t perfect.
When a Credit Card Might Be Better
While a personal loan is usually a better option in the long run, there are a few cases when a credit card could be the smarter option:
- You can repay the balance in full each month — many credit cards have up to 55 days interest-free.
- You need a small, short-term loan (e.g. $200 for groceries).
- You want reward points (but only if you don’t carry a balance).
Just beware of the trap of the minimum payment. If you’re disciplined, a credit card can be a viable option, but for many people, it’s a sure way to get stuck in a cycle of debt.
Debt Consolidation: The Smart Middle Ground
Got multiple credit cards? A debt consolidation loan can be a smart way to take control. By rolling your debts into one loan with a lower rate, you could:
- Save hundreds in interest with rates from just 9.95%*
- Reduce your stress
- Borrow up to $75,000 unsecured
- Pay off debt faster with flexible terms up to 84 months
- Bad credit options available
Loansmart offers tailored debt consolidation options, helping Kiwis swap high-interest credit cards for low-rate loans — all online, with no hoop-jumping.
*Subject to responsible lending checks and criteria.
Credit Cards vs Personal Loans - so what's better?
It depends on your financial situation and how you plan to repay the debt. If you need a larger amount of money and prefer fixed repayments over a set period, a personal loan is usually better. Personal loans often have lower interest rates than credit cards and give you a clear timeline to become debt-free.
For example, borrowing $2,000 on a standard credit card in New Zealand (at ~20.95% p.a.) and making only minimum repayments could cost over $4,400 in the long run. The same amount on a personal loan at 12.95% over 2 years would cost around $2,928—saving you nearly $1,476.
However, credit cards can work well for short-term or emergency purchases if you can pay the full balance each month to avoid interest. They may also offer rewards or interest-free periods.
In general, a personal loan is better for larger, planned expenses or consolidating debt, while a credit card suits short-term use with disciplined repayment.
