When rough times come, you need to consider all your options to get some cash. As every method has its pros and cons, so do cash advances! Take a look at this guide and learn everything about cash advances.
We all know the saying "desperate times call for desperate measures", but even if you are in a tight spot you should always analyze thoroughly the options you've got to get some fast cash. One of the classic methods is to get your credit card, go to the ATM and press on the "cash advance" option. It seems easy and efficient, but you should know it's usually not the best option. Read on to learn everything about cash advances!
What's a cash advance
You may already know this, but a cash advance is a short-term loan that comes with extremely high-interest rates and fees. The most common types of issuers of cash advance are credit cards and payday lenders. In the case of payday loans, there are no credit checks involved. You will be expected to pay it back with the next paycheck. Specialists consider this as the worst method to get cash as it involves interest rates that can even reach up to 400%.
On the other hand, credit card cash advances are considered a bit better than payday loans. In this case, you are actually borrowing from your available credit limit, and you can do it by withdrawing money or cashing a "convenience check."
Main facts of cash advance
First of all, you need to know the difference between using your debit card or your credit card at an ATM. When you use your debit card, you are withdrawing cash from your checking account. If you even use your bank's ATM you won't be paying any extra charges. Whereas, when you use your credit card you are taking a sort of loan from your credit card issuer. This means you will have to pay extra fees and interest.
The second fact you need to know is how much cash you can get in advance. There's obviously a cash advance limit! It will depend on your line of credit. You can call your issuer to check your cash advance limit. Thirdly, bear in mind that taking cash advances increases your credit utilization ratio, therefore they can affect your credit scores. Creditors are watching you, and having many cash advances can signal them that you are having difficulties paying your bills.
How much do they cost?
Take note of the fees and other payments you need to be aware of if you are planning on taking out a cash advance:
1. Cash advance fees: They usually represent 5% of the transaction or $10, whichever is greater.
2. ATM fees: If you don't use your bank's ATM, you will then pay an average of $4.72.
3. Interest charges: The interest when you take out a cash advance will begin accruing immediately! The average is nearly 24%, but some credit cards charge higher.