Cash advances can be a convenient way for credit card users to get money when you need it most, but they can quickly become a nightmare if you don’t know the exact terms and conditions of what you’re agreeing to.
Here are a few things to be aware of if you are considering a cash advance.
The Number of Fees
Cash advances are often promoted as a convenient way to quickly access cash in an emergency, but these transactions are often accompanied by a convenience fee, and an ATM fee may apply if the cash is withdrawn from an out-of-network unit.
High Interest Rates
Another thing to keep in mind with cash advances is the high interest rate associated with them. Percentage rates for cash advances are typically higher than – and sometimes even double – the percentage rate for purchases on a credit card. This helps credit card companies generate revenue as many borrowers are not aware of the high interest rates, and are under the impression that they are treated the same as everyday purchases.
No Grace Period
Unlike most credit card transactions that offer a grace period before interest begins accruing, cash advances do not. Your balance will begin to increase immediately after the transaction is processed.
Encourages Poor Spending Habits
Cash advances make it easy to fall into irresponsible spending habits. For example, if you want to purchase something from a merchant that only accepts cash, you may be tempted to head to an ATM to make a cash withdrawal with your credit card. However, failing to immediately repay the balance and corresponding fees can result in a mountain of debt, especially if done multiple times.
Because of the dangers associated with cash advances, it is best to find other options, or at least thoroughly consider whether or not you will be able to immediately repay the balance before taking one out.
We are determined to ensure you have the tools necessary to avoid future financial distress, and we strive to help you establish a debt free life with the peace of mind that comes with financial security.
To find out more about our services, or to schedule a complimentary consultation, contact us today.
