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Cash Advances Are Still a Pain, but A credit Card Loan? Perhaps Less So
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Cash Advances Still Sting But a Credit Card Loan? Maybe Not So
Other options to borrowing from your limit -- if your card offers such features -- can cost less than using your account at ATMs to withdraw fast cash.
by Sara Rathner Senior Writer/Spokesperson | Credit cards, travel rewards, debt payment Sara Rathner is a NerdWallet expert in credit and travel. She has been featured as a guest on "Today" show, as well as CNBC's "Nightly Business Report" and has been quoted in The New York Times, The Washington Post, The Wall Street Journal, Yahoo Finance, Time, Reuters, NBC News, Business Insider and MarketWatch. Before joining NerdWallet, Sara worked at The Motley Fool for nearly 10 years. She also worked as a freelance personal finance writer as well as a paraplanner. She also holds an associate's education in Journalism at Northwestern University.
Updated February 7, 2023 6:43AM PST
Editor: Kenley Young Credit score, credit cards Kenley Young oversees the daily coverage of credit cards for NerdWallet. Before that, he was a homepage editor and digital content producer for Fox Sports, and before that a front page editor for Yahoo. He has years of experience in both digital and print media, with periods as the chief of the copy desk as well as a wire editor, and metro editor for McClatchy. McClatchy newspaper chain.
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If you're not able to access the funds in your bank account to deal with an unexpected expense A cash advance is one option to gain access to the funds you require, but there are some major downsides. You'll be on the hook on cash-advance and ATM charges, as well as the interest rate that starts to rise the moment you get 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 exceeded 20.4 percent in November 2022. That's already pretty high and, in many cases, interest rates specifically on cash advance loans are even higher than this.
That is to say, that cash advance is likely to cost you.
However, you might have cheaper 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. But unlike a cash advance the newer loan programs have several benefits:
A fixed interest rate for the entire term of the loan.
No separate loan application or credit check is required.
There are no fees in most cases above your interest payment (or any late payment that you might make).
An open procedure that allows you to see what options you'd be qualified for and what the monthly cost of each one would be.
New ways to use credit to repay your loan
Of the major lenders among major lenders, each of Chase and Citi provide these kinds of loans to cardholders who meet the criteria. You can see what you'd possibly be eligible for by signing in to your account online or via either the Chase or Citi applications.
My Chase Loan
allows you to borrow up to 500 dollars. You'll be given the option of several payment plans of varying terms -- for example, you might have the option of choosing an option like a six-month plan or a 12-month option, possibly at a lower rate (think single digits) than your card's current flexible rate on purchases. (Your rates and terms will differ based the creditworthiness of your.) You'll also find out what the monthly payment would be with every loan option. Your loan installment will become part of your credit card's minimum payment each month until the time you are able to pay the loan off. There's no penalty if decide to pay off your loan earlier. Conditions apply.
Citi Flex Loan
A operates similarly: Borrow a minimum of $500 with a fixed rate for a predetermined time. You'll be able choose from loans with different amounts and lengths, and you'll be able to see how much your monthly payment will be in accordance with the terms you choose. Your payment will be included with your minimum credit card installment each month. The terms and conditions apply.
Beyond the loan programs offered by major companies, you might have other options. For instance, hybrid products created by a company known as Upgrade can be used for purchases just like you would normally with a conventional credit card, but you pay off your bill in fixed installments at the same rate similar to a personal loan. You may also be able to borrow against your credit limit by requesting that cash be deposited in your account. APRs and terms vary but it can be less costly than a cash advance.
Possible drawbacks
Both of these loan programs offer the ability to access money quickly for a lower cost than a cash advance, but there can be negatives
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 direct-deposited into your account. Citi Flex Loans can also come in the form of direct deposits which can be as quick as a day of business or a check that is mailed and takes as long as the mailer is delayed by the mail.
The interest rates might not be competitive with personal loans. If you meet the criteria for, you may be eligible for lower interest rates on other types of loans (though for a personal loan it is necessary to submit an application and undergo an assessment of your credit). If you have more time to research and compare rates, it's worth looking into other options to ensure you can secure the cash you need.
You'll still pay interest. If you require cash for upcoming purchases, there are other possible ways to pay with no interest, but you could be charged a fee.
Alternatives to consider
If you have expensive purchase coming up There are options to make use of credit cards to defer the interest payment or to split payments:
A similar plan that you can get through the credit card you use -- such as My Chase Plan or Citi Flex Pay lets you to split a larger cost into monthly installments which are added onto the credit card bill. With Chase, you'll pay a monthly fixed fee for the plan, while with Citi's, you'll be charged interest. Numerous other major issuers provide some version of these plans. If you decide to join an installment plan using your credit card, or the purchase now from a third-party pay later service, be cautious. A report issued in September 2022 from the Consumer Financial Protection Bureau identifies the risks that are associated with these plans, which include the risk of spending more, as well as the chance of being unable to make installments if you combine multiple loans at once.
A credit card with an interest-free promotion of 0% on new purchases can give you up to a year dependent on the card, to settle a balance interest-free. Just know that if you have any remaining debt when the promotion expires, you'll begin to be assessed the normal interest rate.
About the author: Sara Rathner is a NerdWallet credit and travel expert. She has been featured on the "Today" show, Nasdaq as well as CNBC's "Nightly Business Report."
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