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Cash Advances Are Still a Pain However, what about A Card Loan with a Credit Card Loan? Maybe Less So
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Cash Advances Still Sting, but the Credit Card Loan? Maybe Less So
Other options to borrow to your credit limit- - if your card has these features, they can be less expensive than using your credit card in an ATM to get rapid cash.
by Sara Rathner Senior Writer/Spokesperson | Credit cards, travel rewards credit cards, debt repayment Sara Rathner is a NerdWallet expert on credit and travel cards. She has appeared as a guest on "Today" show and CNBC's "Nightly Business Report" she has also been featured in The New York Times, The Washington Post, The Wall Street Journal, Yahoo Finance, Time, Reuters, NBC News, Business Insider and MarketWatch. Before becoming a part of NerdWallet, Sara worked at The Motley Fool for nearly 10 years. She was also a freelance personal finance writer and paraplanner and has an undergraduate degree in journalism at Northwestern University.
Updated Feb 7, 2023 at 6:43 AM PST.
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If you don't have enough money in the bank account to deal with an unexpected expense it is a way to quickly access needed funds -- but there are a few major disadvantages. You'll be on the hook to pay cash advances and ATM charges, as well as interest that will begin accruing as soon as you receive the cash.
In regards to that interest: According to data from the Federal Reserve of St. Louis The average APRs for cards that charge interest were 20.4 percent in November 2022. That's already pretty high and, in many cases the interest rates for cash advances are higher than this.
Also, this cash advance is going to cost you.
But, you could have other, less expensive alternatives, thanks to credit card loan programs that let you borrow against your card's existing credit limit. This is basically what you get when you apply for a traditional cash advance. But unlike a cash advance however, these more recent loan programs provide a variety of benefits:
A fixed rate of interest for the life of the loan.
There is no separate loan application or credit check is required.
No fees in many cases that go beyond interest payments (or any late payment that you might make).
An open procedure that allows you to see the options you're qualified for and what the monthly cost for each option would be.
New ways to borrow against your credit limit
Of the major lenders among major lenders, both Chase and Citi offer these types of loans to qualifying cardholders. You can determine if you'd possibly be eligible for by logging in to your account online or via the Chase or Citi apps.
My Chase Loan
You can borrow a minimum of $500. You'll have the option of a variety of payment plans with varying terms -- for example, you might be able to select one of the six-month or 12-month option, possibly with a lower APR (think one digits) than your card's ongoing adjustable rate of purchase. (Your rate and conditions will differ based the creditworthiness of your.) You'll also find out what the monthly payment would be for every loan option. The loan installment will become part of your credit card minimum payment each month until you pay it off. There's no penalty if you decide to pay off your loan earlier. The terms apply.
Citi Flex Loan
A operates similarly: Borrow the minimum amount of $500 with a fixed rate for a predetermined time. You'll be able to choose from loans with different amounts and lengths, and see what your monthly payment will be according to the terms you select. Your payment will be included in your minimum credit card payment each month. Conditions apply.
Beyond the loan programs from big companies, you might have alternatives. For instance, hybrid products from a startup known as Upgrade can be used for purchases just like you would normally with a conventional credit card, however you pay off your bill in installments fixed at a set APR, like the personal loan. You may also be able to take out a loan against your credit limit by requesting that cash be deposited into your account. The terms and APRs vary but it can be much less expensive than cash advances.
Potential drawbacks
Both of these loan programs offer access to money relatively quickly for a lower cost than a cash advance however, there are negatives
You don't get cash in hand immediately. With My Chase Loan, the borrowed money may take one to two business days before it is directly deposited in your checking account. Citi Flex Loans can also be accessed via direct deposits, which takes as little as a day of business, or a mailed check and takes as long as the mail is delayed by the mail.
Interest rates may not be as competitive as personal loans. Depending on what you qualify for, you may be able to get lower interest rates on other types of loans (though for personal loan, you do need to apply and go through the credit screening). If you've got a bit more time to research it might be worth seeing how else you can access the funds you need.
However, you'll still have to pay interest. If you require money to pay to pay for future purchases There are other payment options charging no interest, though you may be charged charges.
Alternatives to consider
If you have expensive purchase coming up There are ways you can use credit cards to hold off interest payments or split up installments:
A -like plan through an account on your credit card such as My Chase Plan or Citi Flex Pay lets you to split a larger amount into monthly installments that will be added to the bill for your credit card. With Chase, you'll pay an annual fee that is fixed and with Citi's plan you'll be charged interest. Numerous other major issuers provide various versions or other of the plans. However, whether you choose to sign up for an installment plan with your credit card or a third-party buy now, pay later, you must exercise caution. A report released in September 2022 by the Consumer Financial Protection Bureau identifies risky and costly plans, including the likelihood of spending more, as well as the chance of being unable to make payments if you stack multiple loans simultaneously.
A credit card with an interest-free promotion of 0% on purchases made in the new year can allow you a year or more, depending on the card, to settle any balances interest-free. Just know that if you have any remaining debt when the promotion ends, you'll begin to be assessed the normal interest rate.
Author bios: Sara Rathner is a NerdWallet credit and travel expert. She has appeared in the "Today" show, Nasdaq along with CNBC's "Nightly Business Report."
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