What is a credit card cash advance?
A wrecked car, an urgent taxi ride, or journeys to the neighborhood farmer's market all are circumstances which if you don't have liquid cash or acceptable card, then you are in for a difficult situation. However nice this may sound, the question still remains, is taking a cash advance an intelligent financial decision?
Basically, cash advances are short-term loans that you are able to acquire your credit card, up to a specific amount. However, when you make an acquisition with the card which is furthermore a short-term loan you're acquiring the loan in the form of cash. This can be made possible through visiting an ATM or a bank, where you'll withdraw using your credit card instead of your debit card to acquire the cash. It's vital to keep in mind that majority credit card companies won't allow you to obtain the entire sum of your credit maximum in the form of a cash advance. For a majority of individuals, cash advances are restricted to a couple hundred dollars. This means that you can't depend on your credit card for a huge amount of cash in the event of an emergency.
Credit card cash advance fee
Obtaining a cash advance is quite simple, although it seems that this is one of the most expensive methods to get your hands on some money. This is for the reason that cash advances are accompanied by a credit card cash advance fee among other fees and expenditure that a straight-forward ATM withdrawal does not. One thing to keep in mind is that every time you take a cash advance you're going to be charged a cash advance fee. This fee typically adds up to 2%-5% of the total advance. Hence, if you take $300 as a cash advance with a credit card that has a 4% cash advance fee, you'll have to pay up to $12 just to get the money, plus ATM withdrawal fees. The Barclaycard Ring MasterCard charges a flat $3 rate per cash advance, in spite of how much you take as advance.
Although the most luxurious part of taking a cash advance is the interest you'll have to reimburse the money on loan which can be pricey in two ways. To begin with, the interest rate on cash advances is typically much higher than the standard interest rate on your credit card and the interest on cash advances begins the day you get the advance. This means that if you opt to take a cash advance, you'll need to recompense it as soon as possible. Cash advances should only be put to use in a severe crisis, therefore, if you find yourself depending on them, it's time to take a close look at your funds and make some amendments.
How to avoid credit cash advances?
Below are some recommended sources funds to avoid credit cash advances:
- Getting a personal loan from a bank; this can be costly if your credit isn't good, however, the interest charges and provisions could be cheaper than a cash advance.
- Acquiring cash from friends or family; this could be awkward, but the savings will be worth it at the end.
- Bank overdrafts; instead of taking a cash advance at an ATM, contemplate only overdrawing your checking account with your debit card. You’ll encounter a steep fee, but the interest charges are much lower.
Obtaining a cash advance on your credit card means taking on a very costly short-term loan. This is most of the times never a good idea, and you should consider all other alternatives before opting for a cash advance. It’s moreover significant to take the fact that you’re considering using a cash advance as a sign that your investments require some fine-tuning so as not to end up in the same situation again.