Cash advances
A cash advance is a short-term loan that you can take to help cover unexpected expenses. Cash advances should only be used to cover financial emergencies in the short-term, they should never be used to solve long-term financial issues. You can receive a cash advance either through your credit card or through a loan from a money-lending store. Since a cash advance is considered a short-term loan, through either your credit card company or the money-lending store, there are going to be terms and conditions that you must follow when obtaining cash advances.
Before you decide on using cash advances to help you out with your financial emergency you should carefully consider all aspects of cash advances. To do this you are going to need to find out what the advantages and disadvantages are for using cash advances. Once you know the pros and cons of cash advances, you will be able to determine if using a cash advance is in your best interest or if you should explore other options to help you solve your short-term financial problems.
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Here is a look at the pros of using a cash advance.
Number one: Ease of use
A cash advance can provide you with a ready source of money, meaning that it is almost like instant access to cash when we need it. The reason that cash advances are considered a ready source of money is that a cash advance can be obtained through an ATM, which you can usually find an ATM somewhere nearby.
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Avoiding credit card debt:
Many people end up getting into debt with their credit cards because they do not use their credit cards responsibly. What this means is that they use their credit cards for a variety of reasons and end up maxing out their credit card by the end of the month. Not to mention that rather than paying the credit card off in full each month, they only make their minimum payment. Only making the minimum payment is going to end up prolonging the amount of time it takes you to pay off your credit card debt, not to mention it is going to add to an increase in interest fees. If you use your credit card for cash advances, only making the minimum payment each month is not going to help pay off your cash advance. The reason for this is that your credit card provider is going to apply the payments that you make to your credit card balance first, which means interest at the higher rate is going to continue to accrue on your cash advances each day. This does not mean that you shouldn't use credit cards because they are great for those unexpected expenses, such as medical bills or car repairs. The cash advance feature is also great when you need some quick cash. What you need to do is be responsible when using your credit cards. Do not use your credit cards for every purchase that you make, unless you plan to pay off your balance in full at the end of the month. If you are having problems with your credit cards and are only able to make the minimum payments what you need to do is to create a budget that allows you to track where your money is going, including the money you are putting on your credit card. Once you have created a budget you will find yourself getting out of debt faster, if you stick to your budget. The reason for that is that as you pay off one card what you need to do is take that money and apply it towards your other debts so that they are paid off sooner rather than later. |
Number two: Emergency
A cash advance is a great way for you to get enough money to help pay for some unexpected expenses. Cash advances can provide you with the best possible solution to a short-term financial problem. You can usually get a cash advance for $500 to $1,000 depending on your credit card limit or the place where you get the cash advance.
Number three: Easy to obtain
Cash advances are very easy to obtain even if you do not have a credit card. You can go to a store that is in the money lending business or even some banks to obtain a cash advance. In this situation, a cash advance is made based upon your next paycheck, so you will have to apply for the cash advance. However, when applying for a cash advance you have a variety of options to choose from. You can go into the store and apply in person or you can apply for the cash advance online. In either case, you will need to fill out an application and provide proof of certain requisites to be approved for a cash advance. Once you have been approved the money can be directly deposited into your bank account, which can take anywhere from thirty minutes to twenty-four hours.
Here is a look at the cons of cash advances.
Number one: Loan amount
The cash advance amount is not going to be very high because of the fact that it is a short-term loan solution. In general, you will find cash advances from $500 to $1,000. How much you can borrow is going to depend on the state that you live in, if you use a money-lending store and how much money you make each month. If you are using your credit card for a cash advance, the amount of money you can use for a cash advance is going to depend on your credit limit. Credit card companies typically allow you to use 50% to 90% of your credit limit for a cash advance, they rarely allow you to use your entire credit limit for cash advances because of the danger of defaulting on your credit card payments. One of the main reasons that the amount you can borrow for cash advances is so small is because most cash advance loans are due in two weeks to thirty days, when you get your next paycheck or when your credit card bill is due.
Number two: Interest and interest rates
With a cash advance, you start accruing interest from the time you receive your cash. Even if you use your credit card for the cash advance, you are not going to receive a grace period on the cash advance as you do with everyday purchases. What this means is that everyday you have the cash advance outstanding you are going to be accruing interest on it, which means that the longer it takes you to pay off the loan the more you will be charged in interest fees.
In addition to interest accruing on the cash advance from the first day that you take out the loan you are also going to be paying higher interest rates. The lenders of cash advances claim that they have to charge the high interest rates because the number of people who default on these loans is higher than regular loans because cash advances cater more towards people with bad credit. Credit card companies state that they have to charge the higher interest rates because of the higher risk of default from people who use cash advances on a regular basis. How much you actually pay in interest is going to depend on where you obtain your cash advance. If you obtain a cash advance through your credit card, you will end up paying 25% to 25% in interest, depending on your credit card company. If you use a bank or a money-lending store, you can pay triple digit interest, just as you would with a payday loan.
Number three: Fess
Along with the high interest rates, if you use a credit card to obtain a cash advance you are also going to be charged a finance fee for the cash advance. Some credit card companies are going to charge you a flat fee for taking out a cash advance. The flat fee is going to remain the same regardless of how much money you withdraw for your cash advance. Other credit card companies will charge you a percentage of the amount that you have withdrawn. Most companies will charge you between 1% and 4% for the cash advance fee. If you choose a money-lending store for your cash advance you will also be charged a finance fee, which will be a certain amount per every $100 that you borrow, most of them will also have a minimum fee.
In addition to any fees that you have to pay to obtain the cash advance, if you cannot afford to pay the cash advance off when it is do you will end up incurring more fees. Money-lending stores are going to charge you the basic finance fee to rollover your loan until your next payday, and credit card companies are just going to continue charging interest until you have paid it off. If you obtain cash advances with a credit card through an ATM, you are also going to be charged ATM fees. These ATM fees are charged by the owner of the ATM, as a way for them to make money from allowing you to use the ATM.
Number four: Addictive
Perhaps the biggest problem with cash advances is how addictive they can become because of how easy they are to obtain. With your credit card, all you have to do is go to the ATM or to your bank, take out your credit card, and ask for a cash advance. With how easy it is to obtain the cash advances before you know it you can find yourself stopping by an ATM or the bank constantly to get some quick cash, especially if you don't have any money in your checking account. If this type of behavior lasts for a long period of time before you now it you will find yourself under a huge mountain of debt, all created from the cash advances that you took out. In addition, with the accruing principal balance you are also going to be faced with the compounding interest.
Many people will tell you that cash advances should be avoided at all times, that you should look into other options before choosing a cash advance because of the high interest rates, which just continue to add up if you cannot afford to repay the loan. What these people don't know is that using cash advances is not always a bad thing, you just need to make sure that you are using them responsibly. Cash advances can be a great way to get help for your unexpected expenses, but if you are not careful, you can soon find yourself in over your head. The key thing to keep in mind when it comes to obtaining cash advances is to not borrow too much, the less you borrow the more likely you are going to be able to pay it back when the payment comes due. The sooner that you are able to pay off the cash advance the more money you will save your self in interest and finance fees.
