credit & debt

Should You Get a Loan From Your Credit Card?

The convenience can come at a steep cost. But there are options.

If you have a credit card from Chase or Citi, you may be able to borrow against the unused portion of your credit line in the form of a loan. Both issuers are touting the loans to select customers as a quick and easy way to get cash—say, for an unexpected expense or home project.

The primary appeal is convenience. You don’t have to apply for a separate loan or undergo a credit check, and loan payments are rolled in with your regular payment so that you have one bill each month. With the Citi Flex Loan, you can spread out payments for a term of up to 60 months. My Chase Loan, which Chase plans to launch late this year, will have a term of up to 24 months.

For both plans, the interest rate is fixed. Most credit cards have a variable rate, so taking the loan provides more predictability for a big purchase than charging it to your card. But variable card rates will fall further if the Federal Reserve continues to lower the federal funds rate; following September’s decrease of one-fourth of a percentage point, Kiplinger expects another quarter-point cut in late October.

Shop around. The issuer will likely offer you a loan rate that’s lower than your card rate (recent average card rate: 17.14%), but you may find an even better deal elsewhere. (Neither issuer was willing to provide a range of rates charged for the loans, but several Citi cardholders we spoke with said they had received offers ranging from 9.99% to 16.99%.)

If you switch to a card that offers a 0% rate for the first several months you have the account, you’ll fare better as long as you pay off the balance before the no-interest window closes. The Wells Fargo Platinum Visa and U.S. Bank Visa Platinum cards both recently charged zero interest on purchases for the first 18 months.

If you prefer a personal loan, review offers from lenders at lendingtree.com and supermoney.com. Lightstream, a division of SunTrust Bank, recently offered rates as low as 3.99% on personal loans. As you compare loans, check for origination fees and prepayment penalties.

Most Popular

Don’t Be Tricked Into Voluntarily Paying Higher Taxes on Your IRA
IRAs

Don’t Be Tricked Into Voluntarily Paying Higher Taxes on Your IRA

Traditional IRAs are set up in a way that basically incentivizes you (and your heirs) into paying the highest tax bill possible. Don’t fall for it. Co…
July 4, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The 15 Best Stocks for the Rest of 2022
stocks to buy

The 15 Best Stocks for the Rest of 2022

The lesson of the past two years: Be ready for anything. Our 15 best stocks to buy for the rest of 2022 reflect several possible outcomes for the seco…
June 21, 2022

Recommended

11 Education Tax Credits and Deductions for 2022
Tax Breaks

11 Education Tax Credits and Deductions for 2022

Whether you're saving for college, currently paying tuition, or dealing with student loan debt, there's probably an education tax break that can help …
June 30, 2022
Financial Advice from America’s Founding Fathers
credit & debt

Financial Advice from America’s Founding Fathers

What money-management guidance can we glean from the words — and experience — of Benjamin Franklin, Thomas Jefferson, Alexander Hamilton and others?
June 30, 2022
When Will Student Loans Be Forgiven?
Paying for College

When Will Student Loans Be Forgiven?

Millions of Americans are waiting for the Biden Administration’s next hint, which could come later this summer, at how he’ll address the student loan …
June 27, 2022
Strategies to Pay Down Your Credit Card Debt
Making Your Money Last

Strategies to Pay Down Your Credit Card Debt

Consider these smart strategies to eliminate or reduce what you owe.
June 17, 2022