When to use a cash advance on a credit card
If you are looking for a way to access cash quickly and easily you may be considering taking out a cash advance on your credit card. While it may seem like a relatively easy and inexpensive way to gain cash it is important that as a consumer you understand exactly what a cash advance is and how much it may really cost you. Here are the basics of what a cash advance from your credit card really entails-
1. It is especially important to understand that the rules about using your credit card for purchases versus cash advances are completely different. You should be fully informed on the different procedures and regulations regarding cash advances before you even consider getting one. Do not make the mistake of assuming that your cash advance will cost the same as a regular purchase or balance transfer because it's safe to say it won't.
2. First and foremost it is important to realize that the interest rates for a cash advance on your line of credit are different from the interest rates on the balance of your credit card. The interest rate on your cash advance will be much higher than the interest rate on your card. These rates vary slightly from company to company, but usually the interest rate on most cash advances will be between twenty and twenty-five percent.
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3. Most credit cards also charge a flat fee for any cash advances you take out, regardless of the amount that you take and they charge these fees every time you take them. For example-This means that whether you are taking out twenty dollars or a hundred, your credit card company could be charging you ten dollars just for the privilege. On top of that fee if you taking an advance from an ATM the institution that owns the ATM that you use to take out your cash advance will also charge a fee.
4. It is also important to understand that most credit card companies do not allow a grace period before interest kicks in on cash advances. Where you would usually have until the end of the month to pay off your balance before interest starts accruing, when you take out a cash advance the interest starts the second you have your money in hand. To make the situation even worse, many credit card companies will require you to pay off any non-cash-advance balance that you might be carrying on your card before they will allow you to apply your payments to the cash advance. This means that they will apply your payments to pay down the amount with the lower interest rate, while the cash advance balance stays untouched, with the amount owed increasing and increasing under a high interest rate.
5. It is also important to be aware that some credit card companies will send you "credit card checks" in the mail, offering them as an easy way to get your hands on big lump sum. What people often don't realize when they use these checks is that your credit card company will normally treat these "checks" as a cash advance, with all of the accompanying disadvantages.
So now that you know what a credit card advance is and what it can really cost you, you may be asking, "When should I use a cash advance on a credit card?" While it often is not a good idea there are a few times that it may be appropriate to take a cash advance from a credit card. These are-
Do you need cash for an emergency? Be advised that a financial emergency is not that new pair of shoes you wanted going on sale what qualifies as an emergency is a medical situation or some other life-threatening or home-threatening need for cash. If you have no other place to turn a credit card advance can give you the cash you need quickly and easily.
Do you have a plan for paying it back? If you need money only for a short time this might be the solution for you. If you are expecting a windfall that you need to have quickly using a cash advance until that money comes can be a way to lessen your cash crunch fairly easily.
