Credit card advances: proceed with extreme caution
Let's face it, there are going to be times when your cash flow isn't, well, flowing. Your finances may be out of whack from an unexpected expense or your budgeting for the month wasn't on point. Whatever the situation, you may be tempted to take a cash advance. Before you do, learn why advances are otherwise known as a very expensive way to get cash.
How do you get a cash advance?
- If you have a credit card, you can take out cash against an available credit line via ATM withdrawal.
- You can cash a convenience check.
- You can make a direct transfer from your credit card to your checking or savings account.
Why is this a bad idea?
- The interest rate on cash advances is typically higher than the card's annual percentage rate (APR).
- On top of a higher interest rate, there's usually an additional cash advance fee on each withdrawal.
- Interest begins to accrue on cash advances immediately after the funds are withdrawn. This means you'll pay interest even if you pay off the balance in full at the end of the month.
What if I'm in a bind, and I pinky swear I'll never do it again?
- Cash advances are generally cheaper than payday loans.
- Take out the full amount you need on one withdrawal. If you have multiple, small cash withdrawals you will end up paying that fee over and over again. And, pay off the balance as soon as possible.
- If you can, consider applying for a personal loan instead. Interest rates are often lower, and an upfront fee may not be a requirement to receive your funds.
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