Two ways to borrow from your credit card—one might cost you twice as much
Card loans and cash advances are both credit card-based borrowing methods, but they are far from equal in cost and structure. In this article, we break down the true financial impact of each, based on real data, interest rate comparisons, and borrowing scenarios. By the end, you’ll understand why choosing the right option—if borrowing is unavoidable—can save you hundreds of dollars and protect your credit score.
The Basic Structure and Average Interest Rates
At first glance, card loans and cash advances seem similar—they’re both ways of getting cash from your credit card provider. But the details reveal a major difference in cost and credit impact. In 2025, average card loan interest rates are 12–15%, while cash advances average 17–18%, with some even higher.
| Category | Card Loan | Cash Advance |
|---|---|---|
| Use | Mid- to long-term funds | Short-term emergency |
| Interest Rate | 12–15% avg (6–19%) | 17–18% avg (15–20%) |
| Repayment | 3–60 months installment | One-time payment next month |
| Credit Impact | Reported as “loan,” short dip but recoverable | Seen as risky use, long-term score damage |
What Happens When You Borrow 1 Million KRW
Let’s simulate a real scenario. Suppose you need 1 million KRW (about 770 USD). The cost of borrowing it varies drastically depending on the method and duration.
1. One-Month Use:
- Card loan at 12% annual rate = approx. 10,000 KRW interest
- Cash advance at 18% annual rate = approx. 15,000 KRW interest
That’s a 5,000 KRW difference—50% more cost just in one month.
2. Twelve-Month Use:
- Card loan (12%, monthly installments): Total interest around 70,000 KRW
- Cash advance (18%, rolled monthly): 180,000 KRW
The difference grows to 110,000 KRW, or about 2.5x more expensive for the cash advance.
Including Fees: The True Cost May Be Higher
What if we include transaction fees? Cash advances often come with 1.5–2.5% fees upfront, and some card loans have similar or even higher fees in rare cases.
| Loan Type | Fee | Interest | Total Cost |
|---|---|---|---|
| Cash Advance (1 month) | 20,000 KRW (2%) | 15,000 KRW | 35,000 KRW |
| Card Loan (12 months) | 10,000 KRW (1%) | 70,000 KRW | 80,000 KRW |
Even for just one month, high fees can make a short-term cash advance surprisingly expensive.
Impact on Credit Score and Risk of Default
Card loans are treated as formal loans by credit bureaus. While this may slightly reduce your score temporarily, consistent repayment can reverse the effect. Cash advances, on the other hand, are red flags to lenders, especially if used repeatedly. They signal high-risk behavior and reduce long-term creditworthiness.
Worse, since cash advances are usually due in full by the next billing cycle, failure to pay on time often leads to instant delinquency—a major negative on your credit report.
What the Data Tells Us: Average Rates in 2025
According to Korea’s financial disclosures:
- Card loans: 12–15% on average, higher if your credit is poor
- Cash advances: 17–18%, with 20% common for lower scores
The Chosun Ilbo reported that in early 2025, average cash advance interest exceeded 19%, and balances surged by 9 trillion KRW in just two months—proving people are still relying heavily on expensive quick cash options.
Which Option to Choose—and When
1. Planning to borrow for 3+ months?
- Card loan is almost always cheaper and easier to manage.
2. Can repay within a month and fee is low?
- A cash advance might be okay—once—but calculate the real cost.
3. Want to protect your credit score?
- Avoid both if possible. Instead, look for lower-interest alternatives like public small-loan programs or online bank emergency loans.
4. Never do this:
- Use cash advances to pay other cards (debt spiral).
- Take a new card loan to repay an old one (total debt explosion).
In short, a card loan is a structured, long-term loan with relatively lower cost. A cash advance is a fast, risky, and expensive form of borrowing. Always run the numbers—fees, interest, repayment terms—before you borrow.
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