Why You Need to Be Careful with Cash Advances

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Why You Need to Be Careful with Cash Advances

 

There are times when we are brought into a situation where a credit card is not welcome and the merchant only accepts cash. These may become a problem when you don’t have enough cash and the purchase you need to make would be for a basic need like food or a necessary service such as a cab ride. When you are placed in this situation, there may not be any other option but to get cash advances from your credit card.

Cash advances are loans being placed within the available credit limit of your card. In other words, instead of buying a product or service with your credit limit, you are taking in cash that would be used at your disposal.

Why Cash Advances are Costly

When you decide to take on a cash advance, always remember that the interest fees associated with these transactions are much higher than charging the purchase to your card. Interest fees are applied on the day you take the cash advance and can really hurt if it takes you a long time to pay for it. On top of these interest fees are cash advance fees that a credit card issuer charges in addition to ATM fees. This means that a big chunk of your outstanding balance from the cash advance is associated with interest and charges.

Avoiding Cash Advances

As much as possible, cash advances need to be avoided especially when the amount you are planning to take is quite big. Better check on getting a personal loan instead and may yield a much lower amount of interest and finance charges. Because of the high interest yield from these cash advances, it is possible to be paying for a big amount that is only associated to the fees and interest payments. It is important to note that cash advances should only be availed as a last resort.