Avoid Cash Advances at all Cost
After receiving your online credit card approval, you sit down and wait for your credit card that offers a 0% intro APR. When you receive your credit card, you realize that it is not enough for your needs. Luckily, you can get a cash advance on your credit card if you need cash quickly. It’s an easy thing to do, and you can get cash from any ATM accredited by your credit card issuer.
Using a credit card, especially for cash advances, is very easy. However, paying it off is not. Read on and learn the reasons why you should avoid cash advances on your credit cards at all times.
The first reason why you need to avoid cash advances on your credit card is the upfront fees for getting some cash. When you withdraw cash from any ATM, you will incur two charges automatically from some of the credit card companies. The first charge will be the processing fee. This could be a percentage of the amount taken or the minimum amount set by your issuer, which ever is higher. The other charge comes from the owner of the ATM, which is another bank. When you receive your bill, it will show the amount of the charge for the transaction fee, which could be a flat fee or percentage of what you’ve taken from their ATM.
The next reason is that the interest that is applied to your cash advance is much higher than your purchase rate. Normally your credit card after the 0% intro APR will be from 12%-18%. However, the cash advance will have a rate from 20% to 25% not including the additional fees that we have previously mentioned.
Another bad thing about using cash advances with your credit card is the application of interest. Your purchase APR will take effect after a month has passed, and it will include all the interest. If you have the money, you can immediately pay off your balance with minimum interest. The interest rate on cash advances is completely different in terms of the application on the cash advance. The moment you withdraw your money from an ATM, interest will be applied to it immediately. Even if you pay it back after a day or two, you still need to pay for the interest rate.
Lastly, and maybe the most hurtful is that cash advances are on your account itself. When you pay for the balance of your purchase, the cash advances are combined on your credit card bill, and the money that you are paying will not go to the cash advance first, but to your purchased bills. This will create a big disadvantage for you since as we just indicated; the rate of your cash advance is much higher compared to your credit card purchases.
This is the most upsetting truth about cash advances. If you can get hold of cash in another way, do it. Credit card advances will cripple your finances and once you get hooked on it, it’s really hard to pay it off.
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