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Cash Advances Are Still a Pain, but A Card Loan with a Credit Card Loan? Maybe Less So
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Cash Advances are still a pain But a credit Card Loan? Maybe Not So
Alternatives to borrow to your credit limit -- - if your card has the option to do so -- could be less expensive than using your credit card in an ATM for quick cash.
Written by Sara Rathner Senior Writer/Spokesperson | Travel rewards, credit cards credit cards, debt repayment Sara Rathner is a NerdWallet expert on credit and travel cards. She has appeared in the "Today" show, as well as CNBC's "Nightly Business Report," she has also been quoted by The New York Times, The Washington Post, The Wall Street Journal, Yahoo Finance, Time, Reuters, NBC News, Business Insider and MarketWatch. Prior to joining NerdWallet, Sara worked at The Motley Fool for nearly 10 years. She also worked as a freelance personal finance writer and paraplanner and has an associate's education in Journalism at Northwestern University.
Updated Feb 7, 2023 at 6:43 AM PST.
Written by Kenley Young Credit scores, credit cards Kenley Young oversees the daily coverage of credit cards for NerdWallet. Previously, he was an editor on the homepage as well as a digital content producer at Fox Sports, and before that a front page editor for Yahoo. He has decades of experience in both digital and print media. This includes stints as an editor at the copy desk and wire editor as well as a metro editor of The McClatchy newspapers chain.
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When you lack the money on the bank account to deal with an unexpected cost A cash advance is one option to get quick access to required funds, however there are some major downsides. You'll be responsible on cash-advance and ATM fees, along with interest that will begin accruing the moment you get the money.
And about that interest: According to data from the Federal Reserve of St. Louis, average APRs among credit cards with interest rates reached 20.4 percent in November 2022. That's pretty high already and, in many instances interest rates specifically in cash-based advances can be even higher than that.
That is to say, that cash advance is going to cost you.
But, you could have more affordable alternatives, thanks to credit card loan programs that let you borrow against your card's existing credit limit -- which is basically what you get when you request a traditional cash advance. However, unlike cash advances the newer loan programs offer a number of advantages:
A fixed interest rate for the life of the loan.
A separate loan application or credit check is required.
In many cases, there are no charges that go beyond interest payments (or any potential late payments).
A transparent procedure that allows you to see what options you'd be qualified for and what the monthly price of each option would be.
New ways to use credit to repay your loan
In the world of major lenders among major lenders, both Chase and Citi provide these kinds of loans to qualifying cardholders. You can determine if you'd potentially be eligible for by logging in to your account online, or using one of the Chase or Citi applications.
My Chase Loan
The card allows you to take out a minimum of 500 dollars. You'll have the option of a variety of payment plans with varying terms -- for example, you might have the option of choosing an option like a six-month plan or a 12-month plan, potentially with a lower APR (think one digits) than your card's ongoing adjustable rate of purchase. (Your rate and conditions depend the creditworthiness of your.) You'll also see what your monthly payment will be with every loan option. Your loan amount will add to the credit card's minimum payment each month until you've paid it off. There's no penalty if you opt to pay the loan in advance. The terms apply.
Citi Flex Loan
A is similar to borrowing at least $500 with a fixed APR for a specified period of time. You'll be able choose from loans with different amounts and lengths, and know what your monthly payments will be based on the terms you select. The payment will be made with your minimum monthly credit card bill each month. The terms and conditions apply.
Beyond the loan programs offered by major players, you may have alternative options. For instance, hybrid products from a startup called Upgrade can be used for purchases just like you would do with a traditional credit card, but the bill is paid in fixed installments at the same rate similar to a personal loan. You can also use your credit limit to borrow by asking for cash to be deposited in your account. The terms and APRs vary but it can be cheaper than cash advances.
Possible drawbacks
Both of these loan programs allow the ability to access money quickly for a lower cost than a cash advance however, there are disadvantages to both:
You don't get cash in hand immediately. With My Chase Loan, the money you borrow could take between one and two business days to be directly deposited in your checking account. Citi Flex Loans can also be made available as a direct deposit which can be as quick as a working day or a check that is mailed, which takes however long the postage will take.
Rates of interest may not be competitive with personal loans. Depending on what you qualify for, you might be eligible for lower interest rates on other types of loans (though for personal loan, you do need to make an application and pass the credit screening). If you've got a bit more time to research, it could be worth seeing how else you can secure the cash you require.
There's no way to avoid paying interest. If you require money to pay to pay for future purchases There are other payment options charging no interest, but you could be charged a fee.
Options to think about
If you've got big purchases coming up There are options to use credit cards to defer the interest payment or to split payments:
A similar plan that you can get through the credit card you use -- like My Chase Plan or Citi Flex Pay -- allows you to break up a larger amount into monthly installments that will be added to your credit card bill. With Chase the plan, you'll pay an annual fee that is fixed, while with Citi's plan you'll be charged interest. Numerous other major issuers provide some version of these plans. But whether you opt into an installment plan through your credit card, or the purchase now from a third-party pay later option, be sure to take care. A report released in September 2022 by the Consumer Financial Protection Bureau identifies costly risks associated with these plans, including the likelihood of spending more, as well as the risk of being unable to pay for your the payments if you pile on several loans at once.
A credit card that has a 0% interest promotion for new purchases could give you up to a year, according to the card, to settle the balance on a debt-free basis. Be aware that if you are still in debt when the promotion expires, you'll begin to be charged the card's usual interest rate.
Author bios: Sara Rathner is a NerdWallet credit and travel expert. She has been featured in the "Today" talk show as well as Nasdaq along with CNBC's "Nightly Business Report."
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