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by Christy Bieber | Published on March 7, 2023
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These loans can save you money, but don't ignore the downsides.
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Credit cards can be great for charging purchases, but what if there’s something you need to pay for that you can’t charge on your card? Traditionally, if you didn’t have the money in your bank account and wanted to access it using a credit card, you would need to take a cash advance.
The problem, though, is that cash advances come with ATM fees, higher interest rates, and additional upfront fees from your credit card company. This makes them a really expensive way to borrow.
The good news, though, is some card companies are now offering alternatives. These card issuers will actually allow you to take a credit card loan, or a loan against the value of your credit line. The big questions, though, are how these loans work and whether they are right for you.
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Credit card loans are a new financial offering from some credit card issuers. For example, Chase offers My Chase Loan, which allows you to borrow against your card’s credit line. And Citi offers Citi Flex Loan, which works similarly.
With these loans, there’s a minimum and maximum amount you are eligible to borrow. With Chase, for example, the minimum amount is $500 and the maximum is based on your creditworthiness and spending patterns.
You will get a fixed APR that’s typically lower than the standard purchase APR on your card. You’ll also have a set payoff schedule determined when you borrow using a credit card loan. For instance, Citi’s Flex Loan examples show that if you borrow $500 for 12 months, your monthly payments would be around $44, assuming you were offered a 9.99% APR when you borrowed.
If you have enough available credit after borrowing against it, you can also keep using your credit card.
There are some big benefits to getting a credit card loan, including the following:
But there are also a few downsides:
Ultimately, if you think a credit card loan might work for you and this option is available through your card issuer, it doesn’t hurt to check out the terms and see how it compares with a personal loan. But, as with all borrowing, don’t ever borrow more than you truly need or can afford to pay back.
Christy Bieber is a personal finance and legal writer with more than a decade of experience. Her work has been featured on major outlets including MSN Money, CNBC, and USA Today.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
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