A Debt Consolidation & Credit Counseling

Debt Consolidation &
Credit Counseling

Too many bills?
Trouble keeping up?
Behind?

Credit Cards

Cash Advance

Pay off your bills today and lead
a debt free life tomorrow!

Receive your FREE debt consolidation analysis and start saving today! Click Here for your free quote.

Cash Advance

Though you might find yourself cash strapped and be tempted to use your credit card for a cash advance be aware of penalties for such a cash advance.

Whether you take a cash advance on your credit card from an ATM or a ‘convenience check’, there is usually an upfront fee as well as steep interest rates on such advances and the absence of a grace period. A cash advance is just about the most expensive money you can borrow.

A cash advance, which is what money taken out on a credit card is, will cost you an upfront fee of 2% to 4%. If you borrow $4000, then a 4% fee will come to $160. Check the fine print on your card agreement. The interest rate on the borrowed cash is often the highest allowed, upward of 21%..

In addition, unlike most credit cards, cash advances have no grace period. Those high interest charges will start to mount the moment you take the money from the ATM. Keep in mind that the interest rate will be tacked on to the fee as well – ouch!

You should also know that payments to the creditor are usually applied to your balance for purchases first. You get to apply funds to cash advance balances only after the lower interest rate purchases are paid down.

You need to know, though, that card issuers can set their fees according to the marketplace, internal objectives and state regulations. Other factors that will affect these fees include your credit history and, possibly, the type of card you have. It is not unusual to find one institution charging a wide range of fees and rates for various cards. Before you use any card or check issued to you for a cash advance, check the terms the creditor sets.

Creditors say they charge these fees because it is more expensive to process cash transactions than regular card purchases. They also claim that frequent cash advance users have a higher default rate than other users of plastic. The increased cost and risk is passed along to the customer.

Most people don’t seem to notice. According to Visa, the largest credit card brand, cash advance activity increased by 8.1% between March 2002 and 2003. Keep in mind too, that the fees are not hidden. By law, creditors must make full disclosure about fees and charges for their services. You can find this information on the back of your monthly statements.

When considering a cash advance, carefully read your statement, before finding out that you are in way too deep. If there is anything you don’t understand, ask. If you’re not satisfied, then keep shopping until you find something better.

Of course, before you take the plunge, we urge you to review your budget very carefully and ask yourself if you really need that advance. It’s obvious that this quick and easy way to get money can lead to very serious financial problems. Unfortunately, those who take advantage of card advances often do so because they have no choice. Typically, that money is used to pay other credit card debt, as well as for such necessities as groceries and utilities. Indeed, advances were created for those with no other option. Of course, if you are at that point, your debt has most likely gotten out of control, and you should take immediate steps to address it.

Using the cash advance feature on a credit card can give you the quick cash you need, but along with the money comes fees, higher interest rates, lack of a grace period, and difficulty getting the loan paid off. Think twice before using such a credit card ‘perk’.

Free Debt Consolidation Quote

Articles

Credit Cards | Bankruptcy |