If you find yourself short on cash, you may need to borrow money quickly to keep up with your bills or to cover an unexpected emergency. When this happens, you may consider a credit card cash advance or a payday loan. Credit card cash advances and payday loans have at least one thing in common: You can have access to money very quickly. So, before deciding on either loan option, it\u2019s helpful to understand some of the key differences between the two.<\/p>
It’s easy to think that a cash advance and payday loan are the same things, but that’s not the case. We can start to see how they’re different by looking at the definition of each option.<\/p>
A cash advance<\/b> is a short term cash loan that you take out through your existing credit card.<\/p>
A payday loan<\/b> is a loan that typically comes with few eligibility requirements and a quick turnaround time. Lenders can operate online and\/or have physical store locations.<\/p> Payday loans can often throw consumers into a vicious cycle of debt, so these types of loans are regulated in most provinces by the government in order to protect borrowers. You\u2019ll often see limits on how much you can borrow through a payday loan \u2013 typically $100 to $1,500, depending on the province or territory you reside in and the lender you go with.<\/p> The amount you can borrow through a cash advance is generally limited to a percentage of your credit card\u2019s credit limit. Usually, this comes out to a few hundred dollars. Don’t be surprised if your credit card has daily, weekly and monthly cash advance limits in place. It’s very common to see a maximum cash advance limit of less than $500 a day.<\/p> Unlike credit card purchases, a cash advance will typically start accruing interest immediately. In other words there\u2019s no interest grace period, which you usually get when you use your credit card for normal purchases.<\/p> Similarly, a payday loan comes with immediate interest. The key difference is the time horizon for repayment. Some lenders require repayment as early as your next payday, while others will be more flexible with the repayment dates. With a cash advance, you can carry debt long-term, if you wish, as no one is expecting the money back on a set date.<\/p>How much can you borrow?<\/b><\/h3>
Cash advance<\/b><\/th> Payday loan<\/b><\/th><\/tr><\/thead> Percentage of your credit limit<\/td> Usually $100 to $1,500<\/td><\/tr><\/tbody><\/table> What are the repayment terms?<\/b><\/h3>
Cash advance<\/b><\/th> Payday loan<\/b><\/th><\/tr><\/thead> Accrues interest immediately; can carry debt long-term<\/td> Accrues interest immediately; paid back in a fixed timeframe<\/td><\/tr><\/tbody><\/table> \n