Credit card loans charge interest that varies by card, lender, and your credit history
A credit card loan — also called a cash advance or balance transfer — costs you money through interest rates and fees. The interest rate you pay depends on which card you have, your credit score, current market rates, and the type of transaction. A cash advance might carry a rate of 25% to 30% annually, while a balance transfer could be 0% for 6 to 21 months, then 15% to 25% after that introductory period ends. There is no single "credit card loan" cost because every card and every person's rate is different.
Beyond interest, you also pay upfront fees. A cash advance typically costs 3% to 5% of the amount you withdraw, charged when ready. A balance transfer costs 3% to 5% of the balance you move. These fees are added to what you owe, so a $1,000 cash advance at 5% fee plus 28% annual interest costs you $50 right away, then interest on the full $1,050.
Key Takeaways
- Cash advances from credit cards carry interest rates between 25% and 30% per year, plus an upfront fee of 3% to 5%.
- Balance transfers offer 0% interest for a promotional period (usually 6 to 21 months), then revert to 15% to 25% annual interest.
- Your personal interest rate depends on your credit score, the card issuer's current rates, and the type of transaction you make.
- Interest on credit card loans accrues daily, so the longer you carry a balance, the more you pay in total.
- Comparing cards before you borrow shows you which offers the lowest rate or longest 0% period for your situation.
How credit card companies set your interest rate
Your card issuer starts with a prime rate set by the Federal Reserve, then adds a margin based on your creditworthiness. If the prime rate is 8% and your margin is 18%, your rate is 26%. Someone with excellent credit might have a 12% margin (20% total), while someone with poor credit might have a 22% margin (30% total). The card company decides your margin when you open the account, and they can raise it later if you miss payments or your credit score drops.
Different transactions on the same card can have different rates. A purchase might be 18%, a cash advance 28%, and a balance transfer 0% for 12 months. The card's terms tell you each rate upfront, but your actual rate within that range depends on your credit profile at the time you explore.
Cash advances versus balance transfers: cost differences
A cash advance lets you withdraw money from your credit card at an ATM or bank counter. You pay interest when ready — there is no grace period like you get with purchases. Interest starts accruing the day you withdraw the money. You also pay the upfront fee (3% to 5%) right away. If you take out $500 at a 5% fee and 28% annual rate, you owe $525 when ready, plus interest on that $525 from day one.
A balance transfer moves debt from one card to another, usually to take advantage of a 0% introductory rate. You pay the transfer fee (3% to 5%) upfront, but no interest during the promotional period — often 6 to 21 months. After that period ends, the regular purchase rate kicks in. A $2,000 balance transfer at 4% fee costs you $80 upfront, then nothing in interest for 12 months if you choose a 12-month 0% offer. After 12 months, interest accrues at the card's standard rate (typically 18% to 24%) on any remaining balance.
Balance transfers are usually cheaper if you can pay off the balance during the 0% period. Cash advances are more expensive because interest starts when ready and the rates are higher.
How interest compounds on credit card debt
Credit card companies calculate interest daily using your average daily balance. If you owe $1,000 on a card with a 24% annual rate, the daily rate is roughly 0.066%. Each day, they add that percentage to your balance. The next day, interest is calculated on the new, higher balance. This is called compounding, and it means the longer you carry a balance, the faster it grows.
Here is a concrete example: you take a $1,000 cash advance at 28% annual interest with a 5% upfront fee. You owe $1,050 when ready. If you make no payments, after one month you owe roughly $1,074 (the original $1,050 plus about $24 in interest). After three months, you owe about $1,123. After six months, you owe about $1,198. The longer you wait to pay it back, the more of your payment goes toward interest instead of reducing what you owe.
Comparing rates across different card offers
When you are considering a credit card loan, look at the card's terms document, which lists the interest rate range and any promotional offers. The range tells you what rates are possible — your actual rate will fall somewhere in that range based on your credit score. A card might advertise "18% to 27% APR" — if your credit score is 750+, you might get 18%; if it is 650, you might get 25%.
For balance transfers, the promotional period matters as much as the fee. A card offering 0% for 21 months with a 3% fee is usually better than 0% for 6 months with a 2% fee, because you have more time to pay without interest. For cash advances, there is no promotional period — you pay the full rate from day one, so a lower rate is your only advantage.
You can request your card's terms online, by phone, or through your account portal. Compare the APR (annual percentage rate), the fee structure, and any promotional periods before you decide which card to use.
What happens if you only make minimum payments
Minimum payments on credit card loans are usually 1% to 3% of your total balance. If you owe $2,000 and the minimum is 2%, you pay $40. Most of that $40 goes toward interest, not the principal. Your balance shrinks very slowly, and you pay far more in total interest.
Using the $1,000 cash advance example at 28% interest: if you pay only the minimum each month, it takes roughly 4 to 5 years to pay off, and you pay around $600 to $700 in interest alone. If you pay $200 per month instead, you pay it off in about 5 to 6 months and pay roughly $100 in interest. The difference is significant.
Credit card statements show you how long it will take to pay off the balance if you make only minimum payments, and how much interest you will pay. This information is required by law and appears near the top of your statement.
Fees beyond interest you should know about
Beyond the upfront cash advance or balance transfer fee, credit cards may charge other fees that add to your cost. A late payment fee (typically $25 to $40) is charged if you miss a payment. An over-limit fee (if your card allows it) is charged if you exceed your credit limit. Some cards charge an annual fee ($95 to $500+) just for having the card, though many cards have no annual fee.
Interest rate increases are not technically a fee, but they are a cost. If you miss a payment by 30 days or more, the card issuer can raise your interest rate to the "penalty rate," which is often 29% to 36%. This rate applies to your entire balance, not just new charges. Once you have made on-time payments for 6 months, you can call and ask the issuer to lower the rate back.
Frequently Asked Questions
What is the average interest rate on a credit card cash advance?
Cash advance rates typically range from 25% to 30% annually, depending on the card and your credit score. Some cards charge higher rates for cash advances than for regular purchases. Check your card's terms to see the exact range for your account.
Can I get a 0% interest rate on a cash advance?
No. Cash advances do not have promotional 0% periods — interest starts accruing when ready at the card's cash advance rate. Only balance transfers offer 0% introductory periods, and those are usually 6 to 21 months depending on the card.
How long does a balance transfer 0% period last?
Promotional periods vary by card and offer, ranging from 6 months to 21 months. After the period ends, the regular purchase rate (typically 15% to 25%) applies to any remaining balance. Check the card's offer details to see the exact length for the card you are considering.
What is the difference between APR and interest rate?
APR (annual percentage rate) includes the interest rate plus fees, expressed as a yearly cost. The interest rate is just the percentage charged on your balance. For credit cards, the APR and interest rate are usually the same number, but APR gives you the full picture of what borrowing costs.
Do I pay interest on a credit card balance transfer when ready?
No, not during the promotional period. If you transfer a balance to a card offering 0% for 12 months, you pay no interest for those 12 months (though you do pay the upfront transfer fee). After 12 months, interest accrues on any remaining balance at the card's regular rate.