WHAT ARE CREDIT CARD CASH ADVANCES?
In a world where technology is, in some cases, smarter than people, it is hard to believe that there are places that do not take cards.
The cash only policy applies on markets, cabs and even some restaurants. You could withdraw some money, but what happens if you do not have money available? You could take a credit card cash advance.
How does it work? Simple, this is a short-term loan that you could take out of any ATM. Unlike a regular withdrawal, the amount of money you can take on a cash advance is limited.
This may sound like something harmless but it is a bad financial decision, credit card cash advances could lead to debt and a bad credit score.
WHY CREDIT CARD CASH ADVANCES ARE BAD
Before you make any decision regarding your finances, you must have all the information available. It is easy to follow what seems to be the easiest path and then end up with more debt that our income can pay. Credit card cash advances sound like a simple process but it has plenty of hidden factors that make it a bad idea.
• HIGH FEES AND EXPENSES:
When you withdraw money from an ATM with your credit card, there is a small fee you must pay, the same happens with a cash advance, the only difference is that the fees tend to be higher. On average you pay 4% of the amount plus the ATM’s fee. Some cards offer a flat charge, but in most cases you will end up paying a high amount by only using the ATM.
• HIGH INTEREST RATES:
Because it is a short-term loan, the cash advance comes with an interest rate. It is higher than the regular interest rate of your credit card, so you will end up paying more than expected.
• NO GRACE PERIOD (CAN LEAD TO BAD CREDIT SCORES!):
If you take a cash advance on your credit card you will not have the opportunity to pay it back immediately and avoid other charges. The interest starts the day you take the advance.
• PAYMENT ALLOCATION:
Each card issuer has its own policy, but some of them will require more than the minimum payment if you want to repay the cash advance.
HOW TO AVOID TAKING A CASH ADVANCE?
First you will want to take a look into your finances; if you find yourself in the desperate need of a cash advance then something is not working. Remember that taking this loan will not only increase your debt but it will also hurt your credit record.
Getting a personal loan could be better than taking a cash advance, the terms of payment are better and the interest rate is too. Also consider asking a friend or family member for a quick loan.
Another option is to contact an experienced mortgage broker as many mortgage brokers these days don’t only do home loans, many of them do personal loans
Asking for money is easy but getting your finances in order will be a challenge. The first thing you should do is create a monthly budget, reduce your expenses, and consider selling all those things you have around the house but do not use. A cash advance should be your last resource, remember that your credit record is important and so try to keep it clean.