Cash Advance vs. Payday Loan: Which One Should I Take?

Key takeaways

A cash advance draws on money you already have, either a credit line or pay you’ve already earned.
A payday loan is new borrowed money from a separate lender, usually at an APR near 400%.
Both cash advances and payday loans are designed to quickly provide short-term funds. Neither should be used for ongoing expenses.

If you need funds quickly, you may have heard about cash advances and payday loans. Both are designed to quickly provide short-term funds, usually under $1,000, but they work quite differently. Neither should be used for ongoing expenses, as relying on payday loans for recurring costs can quickly lead to serious long-term financial trouble.

What is a cash advance?

A cash advance is money you pull from a credit line you already have, or against pay you’ve already earned. It can also be based on your bank account history with many modern cash advance apps. In any case, taking a cash advance doesn’t involve establishing a new account. There are two main types: credit card cash advances and cash advance apps.

What is a credit card cash advance?

A credit card cash advance draws cash from your card’s existing credit limit, usually through an ATM or a convenience check, and it’s added to your next statement as a charge. Many cards cap cash advances at a separate, lower limit than your regular purchase limit. Interest starts accumulating immediately, with no grace period like you get on purchases, plus an upfront cash advance fee and a higher APR than your purchase rate.

What is a cash advance app?

A cash advance app gives you a small advance against a paycheck you’ve already earned but haven’t received yet, typically in the $20 to $750 range. Most don’t charge interest, just a flat transaction fee or monthly subscription, and the advance is usually repaid automatically from your bank account on your next payday.

What is a payday loan?

A payday loan is a short-term loan from a branch-based or online lender, due in full on your next payday. You’ll either write a post-dated check for the amount plus fees, or authorize an electronic withdrawal on payday.

Payday loans are generally easy to qualify for with proof of income, and can offer same-day funding. Loan amounts are typically small and tied to how much income you can document.

The biggest downside is cost. The short two-week term can make the fees look small, but annualized, many payday loans carry APRs of 400% or more, far higher than even the priciest credit card cash advance.

Cash Advance vs Payday Loan: What’s the difference

A cash advance is based on credit that you already have or your bank account history with a cash advance app you have a relationship with, while a payday loan is a form of new borrowed money from a separate lender.

Both are ways to quickly get cash to cover short-term needs. Both are typically made in amounts under $1,000. Neither is intended as a way to obtain funding for ongoing expenses. In fact, using payday loans for recurring expenses can lead to serious financial trouble in the long run.

	Credit Card Cash Advance	Cash Advance App	Payday Loan
Cost	Upfront fee (3%-5%), plus a cash advance APR that starts immediately.	Either a flat transaction fee or monthly subscription fee.	$10 to $30 per $100 borrowed. $15 per $100 is common.
Funding Speed	Immediately	Minutes to a few days	Usually same day
Credit Check	None, for a credit card you already have.	Usually no	Usually no
Repayment	Revolving, no need to pay back in a set timeframe, but interest compounds until repaid.	Auto-debited on your next payday.	Due on next payday, or may be rolled over (for additional fees), depending on your state of residence

Note: This example is for illustration only. Actual costs and terms will vary based on the specific lender, app, or card issuer.

It’s worth emphasizing the payday loan fee structure. The typical payday loan that charges $15 per $100 for a two-week period works out to an APR of nearly 400%. Credit card cash advance interest rates are generally in the 20s-30s, but after fees are included, the CFPB has found that the true APR of a credit card cash advance is often between 109.5% and 580.4%. With cash advance apps, you generally avoid interest altogether in exchange for a far more reasonable fee structure.

Cash Advance vs Payday Loan: Which Costs Less?

To illustrate how this works, let’s say you need to borrow $500 until your next payday. Here’s how the cost compares across the three methods:

Borrowing Method	Upfront Fee	Cost After ~1 Month	If You Roll It Over
Credit card cash advance	$15 (3% fee)	~$12.50 in interest (29.99% APR)	Interest keeps accruing; no separate rollover fee
Cash advance app	$0 to $15, depending on the app	Included above; no added interest	Repaid automatically from your next paycheck
Payday loan	$75 (at $15 per $100 borrowed)	Not applicable — due in about 2 weeks	Additional $75 fee per 2-week rollover

Note: This example is for illustration only. Actual costs will vary based on the specific lender, app, or card issuer.

Credit card cash advance: $15 upfront (3% fee), plus about $12.50 in interest after one month at a 29.99% APR. Paying it off quickly limits the damage; carrying it longer gets expensive fast.
Cash advance app: $0 to $15, depending on the app. Standard delivery (a few days) is often free; getting the money instantly usually costs an express fee or subscription.
Payday loan: $75 flat fee (at $15 per $100 borrowed), due in about two weeks. Rolling it over for another two weeks adds another $75 fee.

A payday loan is typically the most expensive option of the three, often by a wide margin.

Alternatives to Payday Loans and Cash Advances

Payday loans and cash advances aren’t the only ways to quickly borrow money for short periods. While not all of these may be available to you, here are some of the alternatives you may want to explore.

Personal Line of Credit

A personal line of credit can provide the same financial flexibility as a payday loan, but without the high cost structure. Cash Line™, which is available in the Upstart app, is a revolving credit line that allows you to draw only what you need and repay it based on your monthly billing cycle. You can request a draw at any time, up to your available limit.

Note that Cash Line™ is newly launched and is expanding to more states, so availability may depend on where you live. If you can access Cash Line™, it offers many of the same perks as payday loans, without the expensive rollover trap. Cash Line™ has a $200 minimum approval amount (4x that of some competitors) and free instant deposits.

Is a Personal Loan a Good Option With Bad Credit?

If you need quick cash but aren’t sure you’ll be able to repay it quickly, a personal loan might be a better fit than a cash advance. Even if you have bad credit, you might be surprised at the options available to you.

Upstart is one example of a platform whose model considers many factors beyond your credit score, such as income and employment history. So, borrowers who don’t have excellent credit may still have loan options. You can typically check personal loan availability and personalized rates with a soft credit pull that won’t affect your credit score¹, so if you want a longer-term repayment option, it’s worth looking into.

Credit cards

Depending on what you need the money for, using a credit card to simply cover whatever purchase you need to make is almost always cheaper than using a cash advance. Not only do you avoid cash advance fees, but in most cases, the standard purchase APR is lower than your card’s cash advance APR.

What Are the Risks of Cash Advances and Payday Loans?

Both cash advances and payday loans have the same major risk factor, which is getting trapped in a debt cycle. If you cannot repay a payday loan in full in two weeks, a rollover restarts the fee clock and the balance gets larger and larger. According to the CFPB, roughly 80% of payday loans are either rolled over or reborrowed within 14 days.

There are other traps to keep in mind as well, including:

NSF or overdraft fees if you post-date a check or agree to an electronic withdrawal, and your account doesn’t have enough money.
A credit card cash advance lowers your available credit, which can not only limit your ability to use the card for purchases, but raises your credit utilization and can harm your credit score.

How to Decide Which Option Fits Your Situation

Here’s a quick checklist to help determine which is the best option for you:

How much money do you need? If you need a small amount, such as $500 or less, a cash advance app or a personal line of credit may be better. For larger needs, a personal loan might be the better choice.
How quickly do you need the money? If you can wait a few days, you may be able to get a cash advance app to send you the money completely free. Cash LineTM also offers instant deposits8 at no extra cost, as long as your bank supports it.
Can you realistically repay the amount by your next payday? If the answer is no, an option with flexibility, such as a credit card cash advance or installment loan, might be a better choice.
Do you already have a credit line? Using your existing credit might be cheaper (and faster) than opening a new loan.

The bottom line is that it’s important to not only compare the cost of borrowing, but how quickly the money shows up and how flexible the repayment timeline is. There’s no one-size-fits-all option, so it’s important to carefully consider which works best for you.

FAQ

Is cash advance the same as line of credit?

Not exactly. A cash advance is a single withdrawal of cash against a credit line, income you already have, or that is based on your bank account history. A line of credit allows you to withdraw money repeatedly, up to a limit, and repay it over time.

What credit score do you need for a payday loan or cash advance?

In most cases, a payday loan or cash advance may be available regardless of your credit score, since eligibility is based on factors including your verified income.

Can you get a payday loan or cash advance with no credit check?

In most cases, yes — payday lenders and cash advance apps generally rely on your proof of income or bank account activity, not your credit score.

Do payday loans or cash advances show up on your credit report?

Usually, payday lenders and cash advance apps do not report to the major credit bureaus, but credit card cash advances are normally reported.

Is a cash advance or payday loan easier to get approved for?

Both cash advances and payday loans are generally easier to get approved for than other financing options, especially if you have an active bank account and verifiable income.

What happens if you can’t pay back a payday loan or cash advance on time?

With a payday loan, you can typically roll over the balance for another two weeks, but you’ll pay an additional round of fees. With an app, a failed withdrawal can cause an overdraft or can hurt your access to future cash advances.

Which is more expensive, a payday loan or a cash advance?

In the vast majority of cases, a payday loan is the more expensive and higher-risk way of accessing money. This is because of its sky-high APRs and the lump-sum repayment requirement. Cash advances, even those made through credit cards, tend to cost much less than payday loans.

How fast do you get money from a payday loan vs a cash advance?

Both can be fast ways to get money. Payday loans are typically same-day. Credit card cash advances can be made immediately at an ATM if you have a PIN for your card. Apps can deliver money within minutes, but you’ll often pay an express fee of some kind to get money right away. Cash Line offers instant deposits8 at no extra cost if your bank supports it.

What’s a safer alternative to payday loans and cash advances?

Safer options might include a personal loan, a personal line of credit, making a purchase with an existing credit card, or simply borrowing money from friends or family. The available options, and the most economical, depend on your situation.

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