Payday Loan vs. Credit Card Cash Advance: Which is Right for Me?

When you’re in a financial bind and need cash fast, you may consider a payday loan or a credit card cash advance. Both options can offer same-day funds and may not require good credit for approval.

In this article, we’ll explore how payday loans and credit card cash advances work, so you can determine which one is better suited for your needs.

How payday loans compare to credit card cash advances

A payday loan is a fast cash loan that allows you to get an advancement on your next paycheck. In exchange for a fast cash payout, the borrower must pay a fee for this service. They may also have to pre-authorize the lender to make a debit from their bank account around the date that their next employer payment is expected.

If approved for a payday loan, you can receive the funds as soon as the same day you apply. Then, you can pay back what you owe in two to four weeks. 

A credit card cash advance, on the other hand, is a feature offered by many major credit cards. It is essentially where the cardholder can use the credit card at an ATM and withdraw cash as needed.

Unlike charges to your credit card, cash withdrawals begin to accrue interest daily – usually at a rate that is higher than your card’s normal APR. There are also transaction fees associated with each withdrawal.

Which option is right for me?

When deciding between a payday loan and a credit card cash advance, there are a few important factors to consider.

Loan amount

The limits placed on credit card cash advances can vary for a number of reasons. For instance, if you’ve ever been late on a payment, then the credit card company may limit your withdrawal to only a few hundred dollars.

Meanwhile, if your paycheck is for a thousand dollars or more, then you may be able to borrow a larger amount with a payday loan.

Due dates

When someone gets a credit card cash advance, this is essentially an open-ended loan, meaning that there’s no specific due date for the money to be paid back. While this may sound like a good thing at first, it can actually be risky because interest will build higher each day the balance is outstanding.

Even though payday loans have to be paid back in roughly two to four weeks, this closes the loop on the loan and can prevent any further charges from being applied.


Even though payday loans may come with higher interest rates, it’s important to remember that this is only a one-time charge as long as the loan is paid back in time.

Again, if someone gets a credit card cash advance and doesn’t have the discipline to pay it back within a reasonable amount of time, then the interest charges can become quite considerable.

This can create a debt spiral that may take the cardholder some time to recover from.

The bottom line

People who need money now can rely on payday loans and credit card cash advances. Both provide an immediate payout, but each one comes with its own rules and costs. It’s important that borrowers become familiar with both and choose the one that suits their financial situation.

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