When should I use a cash advance or payday loan?

For millions of people, cash advances and payday loans are a fast and convenient way to cover unexpected expenses such as car repair and medical bills. A cash advance or payday loan can even save you money by helping you avoid bounced checks and late fees on bills. But they aren’t always the best solution for your financial needs.

To help you determine whether a cash advance or payday loan is right for you, we recommend that you consider how you’re planning to use it, how urgent your need is, and what your other options are. Cash advances and payday loans can be expensive, so you should only use them after you’ve considered the facts and decided that it’s your best option.

Here are some guidelines that may help you decide if a payday loan is right for you.

• What do people use cash advances and payday loans for?

  We recently surveyed 500 people to find out why they use cash advances or payday loans. We learned that 75% those surveyed use cash advances or payday loans to cover unexpected expenses or pay bills. The most popular reasons were to get a car fixed, pay for medical care, or to cover a monthly bill. If you're a little short on cash, a cash advance or payday loan is a great way to save money by avoiding bounced check fees and late payment fees.

• Using a cash advance or payday loan to pay bills and avoid late fees

  If you’re running a little behind on your bills, a cash advance or payday loan from may be a better option than paying late fees. Late fees on credit cards and other monthly bills can cost $30 or more. And if your utility or phone service is disconnected, there are more fees to reconnect your service. We recommend that you start by finding out what the late fees are for each of your bills. Then you can compare the cost to determine if a cash advance or payday loan is a better option.

  If you’re running late on bills a cash advance or payday loan may be a better option, depending on the amount of your late fees and the time you’ll need to repay the loan. We recommend that you look at the cost of all of your options before deciding to get a cash advance or payday loan.

• Using a cash advance or payday loan to avoid bounced check fees and overdraft charges

  A cash advance or payday loan is usually a better option than bouncing a check or using your bank's overdraft protection service. Each time you bounce a check, both your bank and the merchant will charge a fee. The total cost is typically $40 to $70 for each bounced check!

  Check with your bank to find out what fees they charge for bounced checks (and don't forget to add in the merchant fees). A cash advance or payday loan may be a better option. And if you're like a lot of folks and sometimes bounce two or more checks, then you can save lots of money by using a cash advance or payday loan.

• Using a cash advance or payday loan for other urgent cash needs

  Let's face it – some things just can't wait until your next payday. If you have an urgent need, a cash advance or payday loan may be a great option. For example, if your car breaks down and you might miss work then a quick loan might prevent lost income. Also, if you have an urgent medical need but are short on cash, a cash advance or payday loan may be the right solution. Millions of people use cash advances or payday loans to cover these expenses because they are fast and convenient. However, we always recommend that you look at all of your options before taking a cash advance or payday loan.

• When should I not use a cash advance or payday loan?

  Cash advances and payday loans are not right for all situations. Before getting a cash advance or payday loan we recommend that you look into all of your options. Here are some options to consider before getting a cash advance or payday loan:

  • Call the company that sent you a bill and request an extension or work out a payment plan
  • Cut back on other expenses such as dining out or entertainment
  • Borrow money from your employer, a friend, or family member
  • Check into emergency assistance programs in your community
  • Get an advance from your credit card provider or bank (make sure you understand all of the fees that may apply)

  Depending on your personal situation, these may be less costly options than a cash advance or payday loan. However, if these options aren't available then make sure you find the lowest cost cash advance or payday loan possible. Don't get fooled by low "introductory rates" that double or triple a few days later.