Difference Between Credit Card Cash Advance Vs. Payday Loans

Sometimes we find ourselves in situations where we need a little extra cash between paychecks. Credit card cash advances and payday loans are two very popular ways to help consumers with bad credit get the money they need to pay the bills quickly. Although both methods of financing have bad reputations, the fact remains that these sources of funding are necessary for many Americans.

Many turn to their credit cards for their immediate cash needs. These people applaud themselves for paying their credit cards on time, and think that their actions are less expensive than getting a payday loan. However, this may not be the case. Let's take a look at payday advances vs. credit card cash advances.

Fees

The fees associated with a credit card cash advance include interest fees and ATM charges. While many credit cards have an average annual percentage rate of around 10 to 15 percent, interest charges for cash withdrawals are typically more than 20 percent. If you don't pay your credit card bill off in full each month, this interest will keep compounding. This could add hundreds of dollars to the cost of your cash advance.

On the other hand, a payday advance typically charges only an upfront fee. Since you will pay the loan off when you receive your next paycheck, there's not the element of compounding interest to worry about.

Terms

The terms of a payday advance are typically that of a very short loan. Your repayment coincides with your next paycheck, making it a lot easier to plan your repayment.

It's never easy to be in a situation where you have to choose between a credit card advance and a payday loan. However, if you understand the fee structure of both lending methods, you can choose the method that is right for you. You should never assume that a credit card cash advance is your only answer without at least considering a payday advance.

Meg G.

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