Home Personal Finance Card Issuers Are Offering Cheaper Ways to Access Your Credit Line

Card Issuers Are Offering Cheaper Ways to Access Your Credit Line

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Credit cards are a convenient way to pay for something, but historically they’ve lacked flexible or inexpensive ways to access your credit line beyond making purchases.

Traditionally, one of the only other ways to tap your credit line for money has been a cash advance, which usually comes with a sky-high interest rate and expensive fees. If your finances are already in poor shape, that kind of costly short-term loan can make matters worse.

But lately, more convenient and affordable options are surfacing. In recent years, both traditional credit card issuers and startups have introduced products and features that make it easier — and cheaper — to tap your credit line to reimburse a friend, pay off large purchases at lower rates, cover a bill you can’t normally pay with a card, or get cash deposited into your bank account.

Easier peer-to-peer payments

Never carry cash these days? Or maybe you’re a few bucks short for your part of the check at dinner? You might consider turning to a feature like American Express’s Send & Split, launched in November 2020 and available on qualifying cards through AmEx’s mobile app.

The “Send” part of this feature lets you use your eligible AmEx card to pay other people through PayPal or Venmo, but without incurring the transaction fees that would normally apply to credit cards used like this on those platforms — typically, about 3%.

Terms apply, including limits on the amounts you can send, and such transactions aren’t eligible to earn rewards. But it can be an ideal solution for splitting the cost of food, gifts or more.

“We’ve definitely seen some sustained user engagement,” said Stephanie Schultz, vice president and head of emerging strategic partnerships at American Express. “One of the common categories that we’ve seen has been gifting, especially over the holiday season.”

What to keep in mind: As with any charge on your credit card, you’ll have to pay off a “Send” transaction in full by your due date to avoid incurring interest. Terms apply.

Flexible financing and installment-loan options

What if you’re looking to finance a much larger expense? Some card issuers and startups have made it possible to turn your available credit into an installment loan.

Chase and Citi, for example, offer My Chase Loan and Citi Flex Loan, respectively, to select cardholders. These options function much like a personal loan from a bank, with money deposited directly into your bank account.

You’ll have a set amount of time to repay the loan with a fixed monthly payment. You’ll be charged interest, but potentially at a rate that’s lower than your credit card’s ongoing APR. These options make it possible to get a loan without an application, which means no new hard inquiry on your credit report.

“With My Chase Loan, customers have told us that the ability to take a loan with no application, no credit check and no new account to manage, at an APR that’s lower than their card’s standard APR is appealing,” said a Chase spokesperson in an email. “They also like the transparency of knowing their monthly payment amount and loan duration upfront, and reassurance that there is no origination or early payoff fee.”

If you need time to pay down a large purchase, this kind of option may be a better deal than charging it directly to your card — and it will be cheaper than a cash advance.

What to keep in mind: These programs are targeted, so they may not be available to everyone at all times. Drawbacks to consider include the potential impact on your credit utilization (and your credit scores), plus the overall cost of the loan, even at a lower APR. The loan amount you can request will be based on your available credit limit and creditworthiness, so it may still be worth checking personal loan rates from other institutions.

Nerd tip: If you’re aiming to break up an individual credit card purchase into more manageable chunks, you could instead look into Chase’s My Chase Plan option or Citi’s Flex Pay feature. Terms and fees may apply, but such options can make monthly payments more predictable. AmEx also offers a Plan It feature, for which a fixed monthly fee applies, but you’ll know how much you’ll pay each month. Terms apply.

OPtions from Startups, too

The startup company Upgrade offers a unique and flexible hybrid product — the Upgrade Card — that combines elements of both credit cards and personal loans.

  • When you use it as a credit card, remaining balances are converted to installment loans.

  • When you use it as a personal loan, you can get funds deposited into your bank account.

In either case, you can pay back the amount in equal monthly installments at a fixed interest rate over a designated time frame.

What to keep in mind: The APR you qualify for will vary, and as with other installment loan options, it’s worth checking rates from other lenders, too.

Third-party options

If your credit card issuer isn’t as flexible with access to your credit line, third-party services may offer another avenue.

For instance, for a fee, Plastiq lets you use eligible credit cards to cover bills you can’t usually pay that way, like rent, mortgage, day care, utilities and more. You charge your card through Plastiq in the amount of the bill (plus a 2.85% processing fee), then Plastiq pays the recipient on your behalf.

This can be a helpful service if, say, a bill is due immediately but you need some breathing room while waiting for a paycheck to arrive. And unlike some of the other options, you can earn credit card rewards, which could help offset some of that processing fee.

In the past, Berna Anat, a San Francisco resident and content creator, used this service to pay bills and earn points to take a trip to New Zealand and other destinations.

“I only ever charge as much as the cash I already had saved for that month,” she said.

What to keep in mind: While a 2.85% processing fee can be cheaper than a cash advance, it can still pack a big bite, especially on large transactions. And if you can’t afford to pay off the charge in full by your credit card’s due date, you’ll incur interest at your card’s ongoing APR, which will be quite expensive. Also, some credit cards may not be compatible with third-party bill payment services. Before using one, read your card’s terms and conditions, or ask the issuer how (or whether) the payment will be processed. It might be treated as a cash advance, for example, rather than a purchase.

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