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Credit card cash advances vs. payday loans: What’s the difference?

Cash advances and payday loans may appear similar, but they’re different in many respects.

If you find yourself short on cash, you may need to borrow money quickly to stay current on bills or pay for an emergency expense. When this happens, you may consider a credit card cash advance or payday loan. Credit card cash advances and payday loans have at least one thing in common: You can use both to obtain money quickly. But before deciding on either option, it’s helpful to understand key differences between the two.

  • A cash advance is a short-term cash loan you take out through your credit card.
  • A payday loan is a short-term loan that typically comes with just a few application requirements and a quick turnaround time. Lenders can be online or in-store.

Let’s talk about a few more areas where cash advances and payday loans diverge.

Cash advances vs. payday loans: How much can you borrow?

Cash advancePayday loan
Percentage of your credit limitTypically $100 to $1,000

Payday loans can sometimes trap consumers in heavy debt. Because of this, state governments have stepped in to protect borrowers. You’ll often see limits on how much you can borrow through a payday loan — typically $100 to $1,000, depending on your state of residence.
The amount you can borrow through a cash advance is typically limited to a percentage of your credit card’s 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 daily cash advance limit of less that $500.
Bottom line: How much you can borrow depends on your credit limit and your state’s laws.

Compare short-term loans and other alternatives

1 - 0 of 0
Name Product Filter Values Loan amount Turnaround time Requirements
Smart Advances
Not rated yet
Smart Advances
$100 to $20,000
As soon as one business day after loan closing
Have a regular income, 18+ years old, be a U.S. citizen with a valid SSN, have an open bank account, meet any additional requirements your lender may have
Smart Advances was designed to help you request the loan you need, for any reason.
OppLoans Installment Loans
Finder Rating: 4.7 / 5: ★★★★★
OppLoans Installment Loans
$500 to $4,000
As soon as the same business day.
+18 years old, Receive paychecks through direct deposit, Meet minimum income requirements, Live in eligible state
Comes with the option to change your due date so you won’t fall behind on repayments.
Chime SpotMe®
Not rated yet
Chime SpotMe®
Up to $200
Same day
Single qualifying $200 direct deposit into Chime checking account in the last 34 days.
Access fee-free overdrafts up to $200 when eligible. Plus get your paycheck up to 2 days early with direct deposit. See Chime terms and conditions.
Brigit
Not rated yet
Brigit
Up to $250
1 to 3 days or same-day in some circumstances
Bank account must have at least 60 days of activity, Balance must be above $0 and have an average minimum balance on pay day
Have up to $250 automatically deposited into your account — for a $9.99 membership fee.
Possible Finance Mobile Installment Loans
Up to $500
As fast as 1 business day
Checking account with 3+ months of banking history, $750+ monthly income, live in eligible state, ages 18+
Borrow up to $500 with just a few swipes — but only for residents of 21 states.
LendYou Short-term Loans
Finder Rating: 2.5 / 5: ★★★★★
LendYou Short-term Loans
$100 to $1,000
Same business day to 1 business day
$1,000+ monthly income, direct deposit, US citizen or permanent resident, ages 18+
Get offers from potential lenders in minutes by filling out just one online form.
MoneyLion Instacash advances
$250, $1000 with RoarMoney account
3 to 5 business days to external checking account, 12 to 48 hours to RoarMoney account
Bank account must have at least 60 days of activity, show recurring deposits and must have a positive balance
Fee-free, interest-free cash advances up to $250.
Fast5kLoans Short-term Loans Connection Service
Finder Rating: 3.5 / 5: ★★★★★
Fast5kLoans Short-term Loans Connection Service
$100 to $35,000
As soon as the next business day
Regular source of income, Verifiable bank account, US citizen, Ages 18+
Get connected with multiple lenders you might qualify with — even if you have bad credit.
CashNetUSA Loan
Finder Rating: 3.6 / 5: ★★★★★
CashNetUSA Loan
Varies by state
As fast as same business day
Regular source of income, bank account, US citizen or permanent resident, age of majority in your state
Sign up for its discount program to get access to coupons and deals on everything from dining out to tax services.
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What are the repayment terms?

Cash advancePayday loan
Accrues interest immediately; can carry debt long-termAccrues interest immediately; pay back in fixed timeframe

Unlike credit card purchases, a cash advance will typically start accruing interest immediately. In other words, there’s no interest grace period like you get for normal purchases.
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. But with a cash advance, you can carry debt long-term, if you wish.
Bottom line: Repayment for a payday loan is due much sooner than for a cash advance.

Can I repay the balance from my cash advance first, before paying for the purchases I made on my credit card?

Yes, as a general rule, credit card issuers have to allocate your payments to the amounts that have the highest interest first. Since cash advances typically have higher interest rates than credit card purchases, the money you pay toward your bill will automatically go towards your cash advance balance first.

What are the interest rates?

Cash advancePayday loan
24% average APR (without calculating additional fees)Typically 400% APR and up (calculated from finance fees)

For a cash advance, you need to pay an upfront fee — for example, $10 or 5% of the amount you take out. Then you pay interest on your cash advance, usually around 24% APR. For a payday loan, you’re charged an upfront fee based on how much you borrow — typically $15 to $30 per $100 you borrow. Since the repayment window of a payday loan is around two weeks, that works out to an APR of about 400% and up.
That creates a distinct difference between cash advances and payday loans. Theoretically, you could take out a cash advance today and pay it back tomorrow, accruing very little interest. But regardless of when you repay a payday loan, you still pay the same amount in finance charges.
Bottom line: You’ll pay a set amount in interest for a payday loan. For a cash advance, the interest you pay depends on how long you carry your debt.

Credit card cash advance tip

When choosing a credit card, if you plan on using the cash advance feature numerous times, it’s a good idea to look for a card that offers the same interest rate for purchases and cash advances. Sure, you’ll still have to pay a cash advance fee, but it’ll be easier to track your interest charges and you may save some money on interest in the process.

How much are the fees?

Cash advancePayday loan
$10 to $20 or 3% to 5% of the transaction, whichever is greaterFinance charge of $15 to $30 per $100 borrowed

You’ll be charged a fee as soon as you take out a cash advance. You’ll typically find the cash advance fee written in your credit card terms like this: “Either $10 or 5% of the amount of each transaction, whichever is greater.” With a payday loan, you’ll pay a finance charge of around $15 to $30 for every $100 you borrow.
Bottom line: Upfront fees for cash advances are often cheaper than those for payday loans — but remember that you still need to pay interest on a cash advance.

What are the requirements?

Cash advancePayday loan
Credit card that allows cash advancesBank account and ID

To take out a cash advance, you need to be approved for a credit card that allows them. Meanwhile, all you need to obtain a payday loan is a bank account and an ID. Payday loan centers usually don’t run deep credit checks, so payday loans are typically easier to get than cash advances.
Bottom line: There are usually fewer requirements to get a payday loan.

Cautions to keep in mind with cash advances and payday loans

Now that you understand the differences between cash advances and payday loans, it’s important to consider the drawbacks of both. One drawback is they’re very expensive. In particular, payday loans are notorious for pulling borrowers into endless debt. Because payday loans cost so much, borrowers often have to take out more loans to pay off what they owe.
Cash advances can cost a pretty penny too. Not only do you have to pay an upfront fee to get one, but you also immediately start accruing interest on the amount you’re advanced. What’s worse is the APR will likely be substantially higher than your credit card’s purchase APR.
Most people take out cash advances and payday loans in financial difficulty — but they can find themselves in deeper debt afterward. We recommend turning to a cash advance or payday loan only in a true financial emergency. Read more about alternatives to payday loans and cash advances.
Important things to know before getting a cash advance on your credit card

Bottom line: Which is the better option?

If you’ve decided that short-term lending is the route you’d like to take to solve your immediate need for cash, your ultimate choice between a cash advance and payday loan will depend on several factors. These factors include: whether or not payday loans are legal in your state, the amount you want to borrow and how soon you’re able to pay the money back. You can also check out our guide on short-term loans to further compare your options.

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2 Responses

    Default Gravatar
    janiceMay 9, 2018

    what is the maximum I can borrow. I need around 100,000.00 or would I be able to borrow from more than one lender at a time

      Default Gravatar
      AshMay 9, 2018

      Hi Janice,

      Thank you for visiting Finder.

      If you are looking to borrow around $100,000, you may apply for a personal loan from banks. The maximum loanable amount is $100,000 in which will still depend on the bank’s assessment of your financial capability. Alternatively, you may also qualify for a secured personal loan. So, check this option as well.

      With regards to having multiple loans, yes you may apply for it given that you will be meeting the lender’s/ bank’s eligibility requirements.

      I hope this helps.

      Let us know if there is anything else that we may assist you with.

      Cheers,
      Ash

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