Cash advances still sting, but a credit card loan? Maybe less so

When you lack the money in your bank account to deal with an unexpected cost, a credit card cash advance is one way to get quick access to needed funds — but there are some major downsides. You’ll be on the hook for cash advance and ATM fees, along with interest that begins to accrue the moment you get the money.

And about that interest: According to data from the Federal Reserve of St. Louis, average APRs among cards that charged interest reached 20.4% in November 2022.  In many cases, interest rates specifically for cash advances are even higher than that.

However, you may have other, less expensive options, thanks to credit card loan programs that let you borrow against your card's existing credit limit — which is essentially what you do when you request a traditional cash advance. But unlike a cash advance, these newer loan programs have several benefits:

• A fixed interest rate for the life of the loan. 
• No separate loan application or credit check is required.
• No fees in many cases, beyond your interest payments (or any potential late payments).

New ways to borrow against your credit limit

Among major lenders, both Chase and Citi offer these types of loans to qualifying cardholders. You can see what you’d potentially be eligible for by logging in to your account online or through the Chase or Citi apps.

My Chase Loan allows you to borrow a minimum of $500. You’ll be given the option of several payment plans of varying terms — such as six or 12 months, potentially at a much lower APR (think single digits) than your card's ongoing variable rate for purchases, based on your creditworthiness. You’ll also see what the monthly payment would be with each loan option. Your loan payment will be added to your credit card minimum payment each month until you pay it off. There’s no penalty if you decide to pay off your loan early. Terms apply.

Citi Flex Loan

A Citi Flex Loan operates similarly: Borrow a minimum of $500 at a fixed APR for a set period of time. Your payment will be included with your minimum monthly credit card payment each month. Terms apply.

Beyond these loan programs from big players, you may have other options. For instance, hybrid products from a startup called Upgrade can be used to make purchases, as you would with a traditional credit card, but you pay off your bill in fixed installments at a set APR.

Potential drawbacks

Both of these loan programs offer access to money relatively quickly for a lower cost than a cash advance, but there can be downsides:

• You don’t get cash in hand immediately. With My Chase Loan or City Flex Loans, it may take one or two business days for a direct deposit to your account.
• Interest rates may not be competitive with personal loans. Depending on what you qualify for, you may be eligible for lower rates on other types of loans.

Alternatives to consider

If you have expensive purchases coming up, there are ways to use credit cards to delay interest payments or split up payments:

• A buy now, pay later-like plan through your credit card — like My Chase Plan or Citi Flex Pay — allows you to split a larger charge into monthly installments that are added onto your credit card bill. But whether you opt into an installment plan through your credit card or through a third-party buy now, pay later service, exercise caution.
• A credit card with a 0% interest promotion on new purchases can give you a year or more, depending on the card, to pay down a balance interest-free. Just know that when the promotion ends, you’ll be charged the card’s usual rate on remaining debt.