Cash Advances from Credit Cards
Credit cards are a great apparatus that have been given to shopaholics. Aside from being able to prolong the payment of an item, the card user can also get cash advances when he or she is in desperate need for some liquid assets. Even though credit cards provide a short temporary happiness for shoppers, they should be used smartly. If one over uses his or her credit cards the card owner may experience more problems rather than satisfaction. One of those pitfalls for a credit card user is advancing too much cash. This article will help explain the pitfalls of using credit card too much to advance cash.
• The interest fees of cash advances are higher than charging a certain item you have purchased. The percentage can be computed 2 ways, either on a percentage basis or on flat rate fees. Percentage basis usually has rates of around 1% to 4%. Flat fees are not based on the amount of money of you have withdrawn.
• There is an emerging trend of combining both methods that’s why the rates end up higher. I.e., the card company can give you the money based on interest rates of x% but should have a minimum of $10. Red the terms very carefully because the fee computation is very tricky.
• Avoid using ATM’s when getting cash advances because ATM’s charges an additional fee for advances. This fee is charged by the financial institution that owns the ATM.
• The finance or interest rate charge that you get from having cash advance is the biggest pitfall. The interest rates are usually around 20-25% compared to the 15.88% to 17.30% of credit card purchases. There are some that issue the same rates for cash advances and card purchases.
• The borrower might think that he or she will be given grace periods. When he borrows the cash his or her cash advance will be immediately accrued. There will still be a charge that you will still need to pay even though you immediately pay your cash advance when the bill arrives. The finance charges and interest rates will be very high when you still have a balance that you have not paid when you used your card to purchase something. This happens because most credit card companies apply the payment to purchases first before the cash advance.
• Credit card checks that you receive are considered cash advances.
• Try to get some help from debt counselors when you rely too much on cash advances for money.
It may be very tempting to get cash advances but remember for everything good that you receive there is always a much worse payoff.
Tags: Master Card, Credit Card Traps, Credit, Spending Money, Budget
