Credit card ‘built-in’ fixed APR personal loans vs. traditional personal loans

Written by
Curtis Arnold
Terms apply; see the online credit card application for full terms and conditions of offers and rewards.

At we discuss the most up-to-date news and trends within the credit card space. Since we first pioneered the concept of online credit card reviews in 1998, our team of financial experts has provided comprehensive and unbiased credit card reviews for more than 175 cards, plus hundreds of additional resource articles to help educate everyday cardholders so they can feel more confident about their card choices. All our content is written and reviewed by industry experts. Though our content may occasionally contain references to products from our partners, we maintain strict editorial integrity and advertiser relationships and compensation never influences ratings, reviews or featured products. The difference between editorial content and advertising must always be clearly stated. Learn more.

Card members can conveniently access their existing credit lines to can get a fixed-rate loan for practically any purpose, but do these “hybrid” offers make good financial sense or are they “ticking time bombs”?

Successful credit card issuers must continuously innovate and adapt to changing customer demand. One interesting example I recently ran across involves two major card issuers, Chase and Citibank, offering fixed APR loans to their card members.

While card issuers have long marketed personal loans to existing cardholders, these loans have historically required a separate application and no guaranteed approval without any real tie to the existing credit card. The new offers take a different, much more compelling, approach.


Key takeaways

  • Credit card built-in fixed rate loans provide a debt consolidation option beyond the normal personal loan or credit card offer.
  • These built-in loans don’t require extra paperwork, credit checks or fees.
  • Traditional personal loans could still provide a better option for larger balances or longer term needs.

Many Citibank and Chase cardmembers now have access to a “hybrid” fixed rate (almost all cards have variable APRs on purchases) loan that utilizes their existing credit line established through their credit card. The loans, which function similarly to personal loans, are ultra-convenient and do NOT require a separate application.

At first, I wondered if my dad’s adage was true in this case: “Son, if it sounds too good to be true, then it probably is!” This article aims to shed light on these offers as well as help you understand the basic differences between credit cards and fixed rate personal loans.

Fixed rate personal loans vs. credit cards

While there are some similarities between fixed rate personal loans and cards, there are significant differences. Lending Club, which offers peer-to-peer personal loans, notes several distinctions.

Credit card features:

  • Credit limits or lines (i.e. how much you card spend on the card)
  • Rates/APRs – typically rates will go up when the Federal Reserve Bank increases rates (and vice-versa)
  • Revolving balances (i.e. the amount of your balance that you don’t pay off by the due date each month and that is carried over to the next billing cycle)
  • A better option for smaller purchases (under $1,000)
  • Offer rebates and rewards on purchases and other consumer benefits
  • May have annual fees

Personal loan features:

  • A fixed rate and payment amount (aka an installment loan) that you choose up front
  • Usually offer lower rates than cards (though there are exceptions- see below)
  • Typically offers larger borrowing limits (up to $40-$50K is common)
  • The length of the loan varies, typically from 12-60-plus months
  • Rates tend to be higher for longer terms. Conversely, monthly payments are usually lower for longer terms
  • Possible origination fee (i.e. a fee charged at the beginning of the loan) and possible prepayment penalty (i.e. a fee charged if you pay off early)
  • A lump sum borrowed up front that you need to start repaying immediately. Use it for anything you need, such as debt consolidation, unexpected expenses, home remodeling, etc.

Finally, knowing why you need the money and how you plan to use the funds are important to consider when you’re trying to decide which option is better. If you don’t have a specific purpose or timeline in mind, a credit card is usually a better choice.

On the flip side, according to Lending Club, “If you do have a specific reason you need the money, know exactly how much you need, and know for how long, securing a personal loan at a lower interest for a predictable time period may be a wiser move than a card.”

I agree that’s good advice assuming, of course, the rate isn’t too high (when compared to the best card rates- see below).


If you’re considering a fixed rate personal loan, you should consider applying for a peer-to-peer personal loan. These unique loans are offered exclusively online. As a result, peer-to-peer companies don’t have the overhead of a brick-and-motor (traditional) bank and historically have attractive rates. Lending Club, mentioned above, and Prosper are two of the biggest players in this space.

Is a fixed rate (loan) better than a variable rate card?

With card rates rising, the obvious answer to this question would seem to be that fixed rate loans are currently better than cards. However, while I don’t really like “riding the fence,” the answer really is it depends.

Certainly, if you’re carrying a balance, a fixed rate loan has appeal since, according to the experts, there are likely to be more rate hikes ahead and it is always nice to “lock in” a rate that won’t rise while you’re paying down your debt.

Having said this, there are still some low rate variable cards that may be more appealing, such as the CardNamediscontinued. This card features a RegAPR APR, meaning your rate could be incredibly low depending on your credit score.

On a related note, fixed rate loan rates have also been rising lately and are getting pretty high themselves. According to Fox,

  • Rates on 5-year fixed-rate loans averaged 16.03%, up from 14.35% a year ago
  • Rates on 3-year fixed-rate loans averaged 11.89%, up from 10.70% a year ago

Linda Sherry, a nationally recognized consumer advocate affiliated with Consumer Action whom I’ve had the pleasure of knowing for many years, adds that the term of the fixed rate loan is also important to consider. As mentioned above, terms are typically up to 60 months (5 years). Rates tend to be higher for longer term loans.

“I can see the advantages of a fixed rate loan, but so much depends on the details, which can vary widely,” Sherry explains. “One crucial element is the term of the loan — interest rates might not be increasing for the next five years [and might actually go down]. So, you’d end up paying more interest than perhaps you need to. Also, look for a prepayment penalty which could possibly be triggered if you want to pay the loan back early. “


It’s worth noting that, while somewhat rare, there are fixed rate cards. In fact, my recent article, Can fixed rate credit cards protect you from rising rates? addresses this very subject. Also, the best 0% intro rate cards offer introductory fixed rates up to 21 months on purchases and sometimes balance transfers, too.

Can’t decide between a fixed rate loan and a card? Why not have you cake and eat it too!?

As mentioned above, Citibank and Chase cardholders now have a unique fixed rate loan option called “Citi Flex Loan” and “My Chase Loan,” respectively. The options are similar, so I’m going to discuss the pros and cons of both at the same time. Note that you’ll want to carefully consider the specifics with your card should you pursue this option.

One important caveat to note is that not all cardholders have this option. Both issuers look at such things as how responsibly you’ve used your account including your payment history, how long you’ve had your card, etc.

The benefits of “Citi Flex Loan” and “My Chase Loan” mimic those of any other personal fixed rate loan (as described above), with some notable differences:

  • Leverages the existing credit line on your card – taking advantage of the loan reduces your available credit by the amount of your loan. For example, if you are approved for a $2,500 loan, your available credit on your card will be reduced by $2,500. Please note that you will be approved for a portion of your available credit so that you can continue to use your card for everyday purchases.
  • You don’t have to go through a lengthy application process
  • There are no application, credit inquiry or origination fees that some personal loans charge. Also, there are no prepayment fees (aka early pay-off fees) that are charged by some loans
  • Choose direct deposit to receive funds in as little as one business day, or check by mail
  • Loans are not treated as a cash advance, which normally has a much higher rate
  • Access your loan availability and options through your issuer’s website or through your card app
  • Your loan payment will be included in your minimum payment due each billing cycle until your balance is paid in full

As you can see, there are several noteworthy advantages in comparison to traditional fixed rate loans. I really like the option of using a Citi Flex and My Chase loan to consolidate debt at a lower rate without having to apply for a new loan. One real-life example underscores this point.

My long time friend Alex Appleson (name changed to protect his identity) knows first-hand the devastating effect of high-rate debt. He went through a rough divorce a couple of years ago and then experienced an unforeseen real estate problem that sent him into a financial tailspin.

Appleson, a veteran on a fixed income, really wants to consolidate his debt. However, since he has had financial problems, he faces a tough reality.

“My credit has also taken a nosedive and I can’t qualify for any type of debit consolidation,” Appleson explains.

Citi Flex or My Chase could be a great option for him.

Of course, as is the case with any credit product, there are potential downsides:

  • Your credit score may decrease. Your loan means you will utilize more of your available credit. The more of your credit line you use, which is called credit utilization, the more your credit score may be negatively impacted. For more info., please see credit card mistake #4: carrying revolving debt by my colleague Geoff Williams. Please note that this decrease is normally temporary, since as you pay down debt, your score will typically rebound.
  • You won’t earn rewards, such as cash back or airline miles, like you normally do with card purchases
  • Your payments, as required by law, will go toward your balance that has a higher interest rate (APR). This law is mean to protect consumers. However, if your loan balance has a higher APR than another balance on your account, such as a balance transfer, then you will need to pay off your loan balance before you can pay off the lower APR balance

What an actual Citi Flex offer looks like

A final concern Sherry points out deals with how much interest you will pay on the loan if you don’t pay it off early (i.e. you only make the required monthly payment until the loan is paid off).

When I showed her a firm offer that my Citibank card recently gave me, she astutely noted “that choosing a five-year loan term (60 months) would mean paying 22% of the amount borrowed in interest over that term (and that was at a “fairly reasonable” 7.99%, which I am not sure most people would qualify for).”

Sherry adds, “I’d compare this to the same length of time on a low-rate credit card that gives you the option to move the balance eventually to another [0% introductory rate] card.”

Interestingly enough, I waited a week to see if I would get a different offer on my Citi account and I did! The breakdown of the 2nd loan I was offered was actually at a lower rate. Here are the details:

Amount of loan: $3,968.00
Monthly Payment: $77.14
Number of Payments: 60 (I could choose between 12-60)
APR: 5.99%

Regardless of intentions, not every card innovation turns out well for consumers. In fact, some are a total flop. Kudos, though, to Citibank and Chase for introducing a unique loan product that has great potential. I really do like this new loan option and hope other issuers will consider offering something similar soon.

Finally, I sincerely hope these insider tips are helpful to you and would love your feedback on how you’ve been able to leverage any type of fixed rate personal loans to your advantage. Who knows, I may include a tip from you in a future article!

Best wishes in getting a “Citi Flex Loan” and “My Chase Loan” should you decide to do so.

Curtis Arnold
CardRatings Founder

Curtis founded in 1998 and, in so doing, helped pioneer the concept of rating credit cards. He has been a nationally recognized expert in consumer credit for well over 20 years. He is the author of “How You Can Profit from Credit Cards: Using...Read more

Featured Partner Cards:


The information in this article is believed to be accurate as of the date it was written. Please keep in mind that credit card offers change frequently. Therefore, we cannot guarantee the accuracy of the information in this article. Reasonable efforts are made to maintain accurate information. See the online credit card application for full terms and conditions on offers and rewards. Please verify all terms and conditions of any credit card prior to applying.

This content is not provided by any company mentioned in this article. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any such company. does not review every company or every offer available on the market.