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When to Use the Credit Card Cash Advance
Most credit cards allow you to get a cash advance on the card, either by withdrawing money from an ATM or by paying for something with a check provided by the credit card company. While cash advances are a convenient and quick way for card users to get cash, they often come with exorbitant fees or interest rates on top of your regular monthly interest rate.
A cash advance is actual money borrowed against your current balance, and for most credit card users the cash available for an advance is only a percentage of their total credit limit. Credit card statements usually note the card user's total credit limit as well as the cash advance limit. Be sure to know this limit and stay beneath it on all cash advances; the card company will most likely handle an unauthorized cash advance like a regular credit card purchase that is above the credit limit.
The Benefits of Cash Advance
The main benefit of cash advances is that they are quick and easy. You can get a cash advance from any ATM in a matter of minutes, which makes them very convenient. Unlike loans, they require no credit checks or paperwork--you are already "preapproved" by virtue of having the credit card. If there are no ATMs available, you can go into a bank and also receive a cash advance from a teller.
Another tempting cash advance benefit is that the credit card company often supplies you with a check-like document (attached to your monthly statement) that is ready to be filled in with an amount and signed. The ease of the checks makes bill paying during a difficult financial time seem like a breeze.
When to Use Your Cash Advance
In today's world, most consumers are used to paying with debit and credit cards, but there are still some businesses that require immediate cash payments. For example, deductibles for an emergency vet visit may catch you by surprise when your bank account is low and the veterinary clinic does not take credit cards. Emergency situations do not afford you enough time to apply for a small personal loan, so a cash advance may be a good option.
Likewise, you may be visiting an area of the world that does not readily take credit cards and have too little money in your checking account to make a withdrawal. In this case, the cash advance is an easy way to get cash in time for your vacation.
If you are considering buying a car or some other large purchase, the cash advance is again a tempting idea. While many people finance large purchases with a lower-interest personal or auto loan, some consumers may not have enough credit to be approved for one. In this case, a cash advance might work well as a down payment.
What to Watch Out For When Receiving a Cash Advance
Despite the convenience and benefits of a cash advance, it is still one of the most expensive methods of borrowing money. Some of the fees and hidden expenses related to a cash advance include:
- Cash Advance Fee--The credit card company will always charge you a fee whenever you take out a cash advance. Some companies offer a flat-rate fee of $10 to $20, but many make the fee a percentage (on average between 3%-9%) of the amount borrowed, which can get pretty expensive if you take out a large sum at once.
- No Grace Period--For normal purchases, most credit card companies allow the cardholder a grace period of twenty to thirty days to pay off new charges in full without accruing interest. However, with cash advances, there is no grace period and interest begins to accrue as soon as the cash is received.
- Higher Interest Rates--While it is not always easily visible on your statements, most credit card companies charge a higher interest rate for a cash advance than for normal purchases. In some states, the interest rate for cash advances is as high as 20%, which causes your balance to climb quickly.
- Your Payment Applies First to Purchases--When you pay your credit card every month, your payment applies to your normal purchases first, and then whatever is left over will be applied to the cash advance. This means that if you have a high balance, it will probably take years to pay back the cash advance. With its high interest rates, your cash advance balance will keep growing and growing unless you pay off the entire credit card fairly quickly.
In today's society, most people require convenience in all areas of their lives, and the popularity of credit card cash advances is certainly evidence of this. Before cashing in on a cash advance, however, make sure you are aware of the added costs and fees that comes with the cash.
About the Author:
Paul Basco Provides Expert opinions and reviews to help you Compare and Apply for a Credit Card Offers online. At GettintingaCreditCard.com, we offer credit cards for bad credit, low apr credit cards, instant approval credit cards and much more.
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