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Credit card companies want to turn your unused credit line into cash that you can borrow for things like home improvements or unexpected expenses. But accepting this loan offer may not be the best choice for your wallet or your credit score.

In recent months, two of the largest credit card issuers, Citi and Chase, have announced they’ll offer credit card loans to eligible cardholders. Citi is offering its Citi Flex Loan, while Chase plans to launch My Chase Loan in late 2019.

Credit card loans are fast, convenient and cheaper than cash advances. But personal finance experts say the loans are still costly and can lower your credit scores, making it more difficult to obtain credit with low interest rates in the future.

Before you accept this seemingly simple way to get cash, consider the risks and compare your alternatives.

“It’s very tempting because it’s so fast and easy, with no application,” says David Rae, a certified financial planner based in Los Angeles. “If you’re already in debt, it can cause that debt to snowball and become a big problem.”

According to Rae:

  • Credit card loans should only be considered for emergency expenses if you don’t have savings, and not for clothes and vacations, etc.
  • Credit card loans aren’t cheap.
  • Taking the loan increases your credit utilization rate, which most financial experts say should be below 30%.
  • If you take a loan, compare interest rates on multiple options.
  • Personal loans may offer lower rates.
  • 0% APR credit card is a good alternative if you pay the balance before the introductory offer period ends.


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