Credit card companies often will allow you to take cash advances from it. Many people take on this route when they need to ease their financial duress a little bit. However, this may not be a good idea for you if you are not aware of the nuances and consequences in case of an unfortunate incident.
Most people are in live with their credit cards and use it more frequently than required. Well, this is the primary objective of the credit card companies. You will see that if you buy a grocery item for $3 in cash you will tend to buy the same item more and spend ten times more. This is due to the dual effects of the promotional offers of the items as well as the credit card companies.
Therefore, giving into the allurements of credit card companies is very easy which eventually leads you to the quicksand of debt. You will soon find that you are unable to pay off your monthly bills and even the minimum payments in a few, if you have multiple credit cards.
Even then, people seem to give in to the offers made by the credit cards and one of the most significant offers that attract more people now is the credit card cash advances. There are lots of statistical figures available that shows the increasing liking of consumers for such cash advances. There is also an alarming figure that shows how many people have ended up in unmanageable debts and even filed for bankruptcy as a consequence.
About cash advance
Typically, a cash advance is the money you get when you sue your credit card to withdraw cash.
- You can get this money through an ATM or in the branch of the bank or office of the credit card company.
- You can even check it out in several supermarkets that the credit card company may have a tie up with.
- All cash advances will incur a fee which may either be a flat fee or a percentage fee depending on the amount of money you withdraw.
- The interest is applicable right from the moment you withdraw the money from any of the above mentioned sources.
When you consider the interest rate of these cash advances, there are few distinct features that you may notice such as:
- Ideally, this rate of interest in cash advance is much, much higher than any credit card purchase that you make.
- Thee interest is charged when you use the credit card to access cash directly or even make any transaction that is cash equivalent.
There are different categories of cash equivalent transactions such as:
- Withdrawing cash directly over the counter of the branch
- Withdrawing cash from an ATM
- Purchase of travellers’ checks
- Gambling transactions for purchase of chips in a casino and even
- Using it in a betting agency.
The accrued rate of interest may not be same for all credit cards. It usually varies widely and you may access different databases to know about the cash advance interest rate. It is crucial that you are aware of the high interest rates and in addition to that the fee that such credit card cash advances may attract for the cash advance amount.
- The cash advance rate starts adding up once you withdraw the amount and keeps on adding until the time you pay it back to the issuer in full.
- Unlike regular purchases where you can save up to $100 with your Macy’s card and even may have a specific number of days before interest is charged on your transaction, credit card cash advances do not have any interest free days.
- The cost of credit card cash advance is much higher as compared to regular credit card usage.
- Overseas cash advances will even have higher rate of interests and fees to pay to the owner of the ATM from which you withdraw the cash.
It is therefore suggested that you do not take any cash advance from your credit card until there is an emergency and you know that you have enough resource to repay it fully and quickly. However, do not make a habit of it at any cost.
Few more facts
There has been a significant rise in the number of cash advances over the years though the overall value of all cash advances taken together may not be as significant.There is a specific reason why credit card cash advances are so popular and are growing in demand among the consumers. This means that the people are taking out smaller amounts as cash advances each time.
Now, you may want to know the amount that you can take out from an ATM through credit card cash advance. Well, it will largely depend on your bank as well as your FICO credit score. Higher the FICO score is more will be the credit limit you can use for a credit card cash advance.
However, even if your credit score is very high, you will never be allowed to take out more cash advance than the set credit limit of your card minus the cash advance fee. Nowadays few most banks even specify your cash advance limit to be more specific. Ideally, this cash limit set is a very small percentage of your entire credit limit.
Short term loan
A credit card cash advance is nothing more than a short term loan provided in a short notice. This is the primary reason that the banks charge a high rate of interest on such cash advances. Few other reasons for the banks to charge such a high rate of interest and fees are:
- The high interest mitigates the high level of risks cash advances carry as compared to any regular credit card purchases.
- It is the highstandard of this interest rate that helps the issuers earn more potential gains when you use the credit card for a cash advance.
The interest rates and fees applicable also help the banks to deter you from making a regular use of your credit card for cash advance transactions.