Credit Card Cash Advance is a feature that comes with many credit cards. It gives you access to cash but it comes at a cost known as cash advance fees. A cash advance can be accessed through the ATM just like a debit card but they are not the same.
You can also access cash using one of the card issuer-supplied convenience checks, or using your credit card overdraft protection. One thing you should keep in mind when it comes to credit card cash advance is that you will have to pay back, usually more than you borrowed. Cash advances are one of the most expensive types of credit card transactions. So, it’s best to avoid it except it’s really an emergency or something you can’t do without. Next time you decide to go for a cash advance, consider the factors below.
Factors To Consider When Taking Out A Cash Advance
Cash Advance Fees
As mentioned earlier, Cash advances are charged a. Cash advance fee that’s either a minimum flat rate or a percentage of the amount of the cash advance.
Cash advance fees typically range from. 2% to 5% of the cash advance amount, with most credit cards charging on the higher end.
ATM Fees For Credit Card Cash Advance
In addition to the cash advance fee, you’ll also be. charged an ATM fee, between $2 and $5, depending on which bank’s ATM you use. The ATM operator and your credit card issuer may both charge an ATM fee.
Cash advances almost always have a higher interest. Rate than the rate for purchases and even balance transfers. Assuming you paid each. Balance within the same amount of time, you would pay more interest on a $500 cash advance. Than on a $500 plane ticket, for instance. The longer it takes you to pay off a cash advance, the more interest you’ll accrue and, consequently have to pay.
No Grace Period
Most credit cards don’t offer a grace period on cash advances. That means you don’t get a full billing cycle to pay off the full amount due—thus. Avoiding a finance charge. Interest starts accruing from the date the transaction clears your credit card account. One tip is to not wait until your bill arrives in the. Mail or in your inbox to pay off the balance if you want to minimize the interest you’ll pay. If that’s the only balance on your credit card, you need to pay it off as soon as possible.
Payment Allocation Rules for Credit Card Cash Advance
Federal law requires credit card issuers to apply the minimum payment to balances with the highest interest rate. But, anything above the minimum, credit card issuers can apply whatever they want. Often, payments above the minimum are applied to the lowest interest rate balance which means it takes longer to pay off a cash advance balance.
And, taking longer to pay means you’ll pay more in the long run. People who take out cash advances are more likely to default on their credit card debt than people who do not. That’s part of the reason that interest rates on cash advances are higher. It also means you’re at risk of falling behind on your credit card payments if you have to take out a cash advance.
If you find that you’re frequently using cash advances to pay for things—especially essentials like groceries—it’s time to take a closer look at your budget and spending and make efforts to align the two.