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Cash Advances Still Sting, but the credit Card Loan? Perhaps Less So
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Cash Advances Are Still a Pain However, what about a Card Loan with a Credit Card Loan? Maybe Not So
Other options to borrowing to your credit limit -- if your card offers these features, they can be less expensive than using your credit card in an ATM to get fast cash.
by Sara Rathner Senior Writer/Spokesperson | Credit cards, travel rewards and debt payments Sara Rathner is a NerdWallet expert on credit and travel cards. She has been featured on the "Today" show as well as CNBC's "Nightly Business Report," she has also been featured by The New York Times, The Washington Post, The Wall Street Journal, Yahoo Finance, Time, Reuters, NBC News, Business Insider and MarketWatch. Prior to becoming a part of NerdWallet, Sara worked at The Motley Fool for nearly 10 years. She was also an independent personal finance writer as well as a paraplanner. She also holds an undergraduate degree in journalism from Northwestern University.
Updated Feb 7, 2023 6:43AM PST
Written by Kenley Young Assigning Editor Credit score, credit cards Kenley Young is the director of daily coverage of credit cards for NerdWallet. Prior to that, he worked as an editor on the homepage as well as a digital content producer at Fox Sports, and before that a front page editor at Yahoo. He has years of experience in both digital and print media, with stints as the chief of the copy desk, a wire editor and a metro editor for the McClatchy newspaper chain.
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When you lack the money in your bank account to deal with an unexpected expense A cash advance is one option to quickly access required funds, however there are some serious drawbacks. You'll be on the hook on cash-advance and ATM charges, as well as the interest rate that starts to rise when you receive the money.
In regards to that interest: According to the data of the Federal Reserve of St. Louis The average APRs for cards that charged interest were 20.4 percent in November 2022. This is already quite high, and in many cases interest rates specifically for cash advances are higher than that.
In other words, that cash advance is likely to cost you.
However, you may have more affordable options, thanks to credit card loan programs that allow you to use your card's current credit limit. This is basically what you get when you make a request for a conventional cash advance. But unlike a cash advance, these newer loan programs have several benefits:
Fixed interest rates for the duration of the loan.
A separate loan application or credit checks are required.
There are no fees in most cases above your interest payment (or any potential late payments).
A transparent process that lets you know what options you'd be eligible for , as well as what the monthly price of each one would be.
New ways to take advantage of your credit limit to borrow
Among major lenders among major lenders, they both Chase and Citi provide these kinds of loans to qualifying cardholders. You can find out what you could possibly be eligible for by signing into your account online, or using either the Chase or Citi apps.
My Chase Loan
You can borrow up to 500 dollars. You'll be given the option of various payment plans with varying terms -- for instance, you may be able to choose one of the six-month or 12-month plan, potentially with a lower APR (think single digits) than your card's current adjustable rate of purchase. (Your rate and terms depend on your creditworthiness.) Also, you'll be able to see what the monthly payment would be for each loan option. Your loan payment will be added to your credit card's minimum payment each month until you've paid it off. There's no penalty if opt to pay off your loan in advance. Conditions apply.
Citi Flex Loan
A is similar to borrowing at least $500 with a fixed APR for a set time. You'll be able choose from loans of different amounts and lengths, and see what your monthly payment will be based on the terms you choose. Your monthly payment will be included with your minimum credit card payment every month. The terms and conditions apply.
Beyond the scope of these loan programs offered by major players, you could have other options. For example, hybrid products offered by a start-up called Upgrade are a way to purchase items, just as you would do with a traditional credit card, but the bill is paid in installments fixed at an APR that is fixed, just similar to an individual loan. You may also be able to use your credit limit to borrow by requesting that cash be deposited in your account. APRs and terms vary however it could be less costly than cash advances.
Possible drawbacks
Both of these loan programs allow quick access to cash for a lower cost than a cash advance however, there are downsides:
You don't get cash in hand immediately. When you take out a My Chase Loan, the money you borrow could take between one and two business days before it is direct-deposited to your bank account. Citi Flex Loans can also come in the form of direct deposits, which takes as little as a working day, 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. If you meet the criteria for, you could be eligible for lower rates for other kinds of loans (though for personal loan you will need to apply and go through a credit check). If you have a little more time to look around and compare rates, it's worthwhile to consider other ways you can secure the cash you require.
However, you'll still have to pay interest. If you require money to pay to pay for future purchases There are other payment options that do not charge fees, although you might be charged charges.
Options to think about
If you've got big purchase coming up There are options you can use credit cards to delay interest payments or split up payments:
A -like plan through the credit card you use -- like My Chase Plan or Citi Flex Pay lets you to divide a bigger cost into monthly installments which are added onto the credit card bill. With Chase plans, you'll be charged a fixed monthly fee and with Citi's plan, you'll be charged interest. Many other major issuers offer some version that includes these types of plans. If you decide to join an installment plan with your credit card, or a third-party buy now, pay later option, be sure to be cautious. A report issued in September 2022 from the Consumer Financial Protection Bureau identifies risky and costly plans, which include the risk of spending more money and the chance of being unable to pay for your payments if you stack multiple loans simultaneously.
A credit card with the 0% interest rate on new purchases can give you up to a year, dependent on the card, to settle a balance interest-free. But be aware that if have any outstanding debt after the promotion expires, you'll begin to be subject to the usual interest rate.
Author bios: Sara Rathner is a NerdWallet credit and travel expert. She has appeared as a guest on "Today" show, Nasdaq and CNBC's "Nightly Business Report."
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