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(image: http://www.imageafter.com/image.php?image=b20nature_elements006.jpg&dl=1)Cash Advances Still Sting However, what about A credit Card Loan? Perhaps Less So
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Cash Advances are still a pain However, what about the Card Loan with a Credit Card Loan? Maybe Not So
Options to borrow to your credit limit- - if your card has such features -- can cost less than using your account at ATMs to get fast cash.
Written by Sara Rathner Senior Writer/Spokesperson | Credit cards, travel rewards and debt payments Sara Rathner is a NerdWallet expert in credit and travel. She has been featured in the "Today" show and the CNBC's "Nightly Business Report" as well as being featured by 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 was also a personal finance writer freelance as well as a paraplanner. She also holds a bachelor's degree in journalism at Northwestern University.
Updated Feb 7, 2023 at 6:43 AM PST.
Editor: Kenley Young, Assigning Editor Credit cards, credit scores Kenley Young is the director of 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 at Yahoo. He has years of experience in digital and print media, including periods as the chief of the copy desk and wire editor as well as an editor of the metro at the McClatchy newspapers chain.
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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 the funds you require, but there are some serious drawbacks. You'll be on the hook to pay cash advances and ATM fees, in addition to interest that begins to accrue as soon as you receive the cash.
In regards to that interest: According to data from the Federal Reserve of St. Louis, average APRs among credit cards with interest rates reached 20.4 In November 2022, the rate was 20.4 percent. That's pretty high already and, in many cases the interest rates for cash advances are higher than that.
Also, this cash advance will cost you.
However, you might have other, less expensive 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 apply for a traditional cash advance. However, unlike cash advances, these newer loan programs have several benefits:
A fixed rate of interest 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 possible late payments).
A transparent process that lets you see what options you'd be eligible for , as well as what the monthly cost for each option would be.
New ways to take advantage of your credit limit to borrow
Of the major lenders among the major lenders, each of Chase and Citi offer these types of loans to qualifying cardholders. You can see what you'd potentially have the ability to get by logging into your account online or through the Chase or Citi applications.
My Chase Loan
You can borrow up to $500. You'll have the choice of a variety of payment plans with varying terms -- for example, you might have the option of choosing one of the six-month or 12-month plan, which could be at a lower rate (think single digits) than the card's regular variable rate for purchases. (Your rate and conditions will vary based the creditworthiness of your.) You'll also see what the monthly payment would be with every loan option. Your loan amount will add to the credit card's minimum monthly payment until the time you are able to pay it off. There's no penalty if you decide to pay the loan in advance. Conditions apply.
Citi Flex Loan
A operates similarly: Borrow at least $500 at a fixed APR for a predetermined time. You'll be able to choose from loans with different amounts and lengths, and know what your monthly payments will be in accordance with the terms you select. Your payment will be included in your minimum credit card bill every month. The terms and conditions apply.
Beyond the loan programs offered by major players, you may have alternatives. For example, hybrid products offered by a start-up called Upgrade can be used to purchase items, just as you would do with a traditional credit card, but you pay off your bill in installments fixed at an APR that is fixed, just as you would with an individual loan. You may also be able to use your credit limit to borrow by requesting cash to be deposited in your account. APRs and terms can vary but it can be cheaper than cash advances.
Potential drawbacks
Both loan programs allow access to money relatively quickly with a lesser cost than cash advances however, there are downsides:
You don't get cash in hand immediately. With My Chase Loan, the loaned money could require 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 a direct deposit, which takes as little as a day of business or a mail-in check, which takes however long the mailer will take.
The interest rates might not be as competitive as personal loans. Based on the type of loan you are eligible for, you may be able to get lower 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've got a bit more time to shop around and compare rates, it's worthwhile to consider other ways you can get the money you need.
You'll still pay interest. If you require cash for upcoming purchases There are other ways to pay with no interest, but you could be charged a fee.
Options to think about
If you've got expensive purchase coming up There are ways to use credit cards to defer interest payments or divide the payments:
A similar plan that you can get through the credit card you use -- such as My Chase Plan or Citi Flex Pay It allows you to break up a larger amount into monthly installments that are added onto 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. Many other major issuers offer some version of these plans. If you decide to join an installment plan with your credit card or through the purchase now from a third-party pay later, you must be cautious. A report issued in September 2022 from the Consumer Financial Protection Bureau identifies the risks that are associated with these plans, including the likelihood of spending more and the possibility of not being able to make payments if you stack several loans simultaneously.
A credit card with an interest-free promotion of 0% on new purchases can give you a year or more depending on the card, to pay down the balance on a debt-free basis. Be aware that if you have any remaining debt when the promotion ends and you're assessed the normal interest rate.
About the author: Sara Rathner is a NerdWallet travel and credit cards expert. She has been featured as a guest on "Today" program, Nasdaq as well as CNBC's "Nightly Business Report."
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