Cash Advances and Payday Loans: The Real Cost in Canada
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When you need cash before payday, a credit card cash advance and a payday loan both look fast. Their real cost is very different. According to the Financial Consumer Agency of Canada (FCAC), borrowing $300 for two weeks costs about $7.65 with a cash advance and $42 with a payday loan. This guide explains why, as of October 18, 2026, and what legal limits apply. For more borrowing guides, see our loans hub.
The short version: a payday loan at the federal cap of $14 per $100 works out to an annual rate of about 365%, roughly ten times the 35% criminal rate that applies to most other consumer loans. A cash advance is expensive by card standards, but far cheaper than a payday loan.
Cash advance vs payday loan: what $300 for two weeks costs
The FCAC compares four ways to borrow $300 for 14 days. Each includes the interest and the typical fee assumed by the FCAC.
| Option | Assumptions used by the FCAC | Total cost |
|---|---|---|
| Line of credit | $5 fee and 8% annual interest | $5.92 |
| Overdraft protection | $5 fee and 21% annual interest | $7.42 |
| Credit card cash advance | $5 fee and 23% annual interest | $7.65 |
| Payday loan | $14 per $100 borrowed | $42.00 |
The gap is large. A payday loan costs more than five times as much as a credit card cash advance for the same amount and the same period. The cheapest option, a line of credit, costs less than one-seventh of the payday loan.
How a credit card cash advance works
A cash advance lets you withdraw cash against your credit card limit, at an ATM or a branch. It is convenient, but it is not treated like a purchase.
Interest starts on day one
With purchases, you usually pay no interest if you pay your full balance by the due date. Cash advances are different. TD, for example, states that cash advances accrue interest at the cash advance rate from the date the advance is made. There is no interest-free period.
Cash advance rates in our catalogue
Cash advance rates are often higher than purchase rates. As of October 18, 2026, our card data shows:
- TD Cash Back Visa* Card: 22.99% on cash advances (21.99% in Quebec), versus 21.99% on purchases
- MBNA True Line® Mastercard®: 24.99% on cash advances, versus 12.99% on purchases
- American Express Cobalt® Card: 21.99% on cash advances
- CIBC Select Visa* Card: 13.99% on cash advances
At 22.99%, a $300 advance kept for 14 days costs about $2.65 in interest. At 24.99%, it costs about $2.88. Most issuers also charge a transaction fee on each advance; the FCAC example assumes $5. Check the exact fee in your cardholder agreement, because it varies by card. Our guide to credit card fees explains where to find it.
How payday loans work in Canada
A payday loan is a short-term loan of up to $1,500 that you must repay within 62 days, according to the FCAC. You usually repay it from your next paycheque. Payday lenders must hold a licence in the province or territory where they operate.
The $14 per $100 federal cap
In provinces with payday loan regulations, the maximum cost is $14 for each $100 borrowed. Those provinces are Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island and Saskatchewan. In the other provinces and territories, the FCAC says the maximum cost of borrowing equals the criminal interest rate of 35%.
Why $14 per $100 equals about 365%
Borrowing $300 for 14 days at $14 per $100 costs $42. That is 14% of the amount borrowed for two weeks. Spread over a year, the FCAC calculates the equivalent annual interest rate at approximately 365%.
The real damage comes from repeat borrowing. If you took a new two-week payday loan at the same cost every two weeks for a full year, the compounded annual cost would reach about 2,945%, by our calculation. Most provinces ban rollovers, so lenders cannot simply extend your loan and charge a new fee. Taking out a new loan to repay the old one has the same effect, though.
The 35% criminal rate
Since January 1, 2025, section 347 of the Criminal Code sets the criminal rate of interest at 35% APR. Lending above that rate is a criminal offence. Payday loans in provinces with an approved regulatory regime are a specific exception, limited to the $14 per $100 cap.
For comparison, $300 borrowed for 14 days at 35% APR costs about $4.03. A payday loan costs $42 for the same loan. If you live in our list of nine regulated provinces, any payday lender charging more than $14 per $100 is breaking the rules. Elsewhere, a loan above 35% APR is not legal.
Cheaper ways to cover a short gap
The FCAC lists several alternatives to a payday loan, and most cost far less.
- Ask the company you owe for more time to pay the bill
- Cash out unused vacation days, if your employer allows it
- Ask your employer for a pay advance
- Borrow from family or friends
- Use a line of credit or a loan from your bank or credit union
- Use overdraft protection on your chequing account
- Take a cash advance on your credit card, which is still cheaper than a payday loan
- Ask your lenders for a payment deferral
If a cash shortfall happens often, the long-term fix is a small emergency fund. Our emergency fund calculator helps you set a target. If you carry a balance regularly, a low-interest credit card can reduce the cost of borrowing.
Payday loans and your credit score
A payday loan does not usually help you build credit, and a loan that goes to collections can hurt it. Collections can stay on your credit report for up to 6 years, according to the FCAC. Our article on payday loans with no credit score covers how lenders approve borrowers without a credit check and what to watch for.
Conclusion
A credit card cash advance is an expensive way to borrow, because interest starts the day you take the cash and a fee usually applies. A payday loan is far more expensive: $42 on $300 for two weeks, equal to an annual rate of about 365%. Before you take either one, ask your creditor for more time, check your line of credit or overdraft, or ask your employer for a pay advance. If short-term borrowing has become a habit, a budget and a small emergency fund will save you far more than any loan.
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Frequently asked questions about cash advances and payday loans
Is a cash advance cheaper than a payday loan?
Yes, in almost every case. The FCAC estimates that borrowing $300 for 14 days costs about $7.65 with a credit card cash advance, assuming a $5 fee and a 23% rate, versus $42 with a payday loan. A cash advance is still expensive, because interest starts on the day you withdraw the money. If you have a line of credit, it is usually cheaper still. Our guide to credit card interest explains how card interest is calculated.
What is the maximum a payday lender can charge in Canada?
In Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island and Saskatchewan, the maximum is $14 for each $100 borrowed, as of October 18, 2026. In other provinces and territories, the FCAC says the maximum cost of borrowing equals the criminal interest rate of 35%. Payday lenders must be licensed where they operate. See our loans hub for alternatives.
Why does a payday loan equal about 365% interest?
A fee of $14 per $100 means you pay $14 on every $100 borrowed for only 14 days. Multiply that over the 26 two-week periods in a year and the FCAC puts the equivalent annual rate at approximately 365%. If you renew the loan repeatedly, the compounded cost grows much higher: about 2,945% a year by our calculation. Compare this with a card's rate using our guide to credit card fees.
Do cash advances have an interest-free period?
No. Unlike purchases, cash advances generally start accruing interest on the day you take the money. TD states this explicitly for its cards. Most issuers also charge a fee on each advance, and the cash advance rate can be higher than the purchase rate: the MBNA True Line® Mastercard® charges 24.99% on cash advances versus 12.99% on purchases, as of October 18, 2026. Compare low-rate options on our low-interest credit cards page.
Can a payday loan be rolled over?
In most provinces, a payday lender cannot extend or roll over your loan, according to the FCAC. That usually means it cannot push back the due date and charge you a new fee. Taking a new loan to repay the old one still adds a new $14 per $100 charge. If you cannot repay on time, talk to the lender and to a non-profit credit counsellor. Our article on payday loans with no credit score explains the approval side.
What should I do instead of a payday loan?
The FCAC suggests asking for more time to pay your bills, asking your employer for a pay advance, borrowing from family, using a line of credit or overdraft protection, or asking your lenders for a payment deferral. A credit card cash advance is also cheaper than a payday loan. For the longer term, build a small cushion with our emergency fund calculator.
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