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Payday loans and credit card cash advances are both considered to be more expensive forms of finance and they are generally reserved for emergency situations. However, there may be occasions when these forms of finance are necessary for people, and it's a good idea to know which one could suit their circumstances best.
If someone has a credit card they can withdraw cash from an ATM. They can also apply for a payday loan to have the money transferred to their account on the same day, or sometimes within the hour. Find out more in this guide.
If you're struggling financially and would like to speak to someone for free financial advice, information and assistance you can call the Financial Counsellors hotline on 1800 007 007 (open from 9:30am to 4pm, Monday to Friday). If you are suffering financial problems related to the coronavirus pandemic you may be eligible for additional support. Find out more here: https://www.finder.com.au/coronavirus-financial-help
Do you really need a loan today?*
It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.
Check your options before you borrow:
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* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.
Both payday loans and credit card cash advances are types of credit that can be used for whatever someone needs. There are no specific restrictions on how someone can use these funds.
Payday loans involve customers applying with a lender for a specific loan amount. They will be sent the funds, if they're approved, generally within 24 hours. They then make repayments according to the repayment scheduled outline in their contract, with usual terms ranging from 16 days to one year.
Cash advances are where borrowers withdraw cash from their credit card or transfer money from their credit card to an account. As this is not a purchase, they are charged a higher rate, which is usually above 20% p.a. It becomes part of their outstanding balance, of which they have to make a minimum payment monthly to keep the credit account in good standing.
Both credit card cash advances and payday loans are costly forms of credit. Receiving an advance from a credit card will set someone back between 20-24% p.a. A payday loan of less than $2,000 will cost an establishment fee that is 20% of the amount they borrow and a 4% monthly fee.
If someone pays the cash advance back quickly it can be cheaper, but if they only make the minimum repayment then they may want to consider a payday loan. This is because their ongoing repayments will pay the money back entirely in that set term, whereas the cash advance could be an ongoing debt.
Features | Payday loans | Cash advance |
---|---|---|
Fees | 20% establishment fee + 4% monthly fee | Approximately 1.5-4% |
Interest | Interest is charged as fees as above | Approximately 19-22% p.a. |
Terms | Vary between 14 days and 12 months | Ongoing line of credit, no set terms |
Eligibility | Flexible criteria. Bad credit, Centrelink, unemployed accepted. | Need to be employed and have good credit. |
Credit cards with low cash advance rates
Even after understanding both products, some prospective applicants might still be unsure which one is right for them. There are several questions people who are considering a cash advance or a payday loan should consider prior to submitting an application:
It’s always important to compare options before applying for a payday loan or taking cash out on a credit card. Many financial experts advise to explore other avenues before applying for a payday loan or withdrawing money on a credit card. Due diligence is a must with both products.
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HELLO
IAM LOOKING FOR A $100,000.00 LOANS WITH MONTHLY PAYMENTS
Hi Kenneth,
Payday loans are usually for smaller amounts, below $2,000, and there are no loans currently available for comparison on finder.com.au of this size.
I’m sorry I couldn’t be of more assistance,
Elizabeth
just wondering how and where you apply online to receive a credit card cash advance can you use your personal bank?
Hi Angie,
Thanks for your question.
A credit card cash advance involves you withdrawing cash from an ATM using your credit card. To do this, you’ll need to hold a credit card or apply for a card and then withdraw the cash. If, however, you were looking for a cash advance loan, you can compare and apply for one on this page.
I hope this has helped.
Thanks,
Elizabeth