On a similar note...
On a similar note...
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If you take your credit card to an ATM, you can use it to get a cold, hard cash advance — but it will cost you. Before using this service, make sure you know what fees and interest rates to expect, so you won't get any big surprises on your credit card statements.
Credit card cash advance basics
A cash advance, broadly speaking, is a loan. When you need cash fast, you can get these particular loans from a few different places, including payday lenders (which typically charge a three-digit annual percentage rate) and your credit card issuers. Because credit card issuers view these as riskier transactions, they often come with higher interest rates and fees. There are different types of cash advances:
Convenience Check Cash Advance: Sometimes when you get a new credit card, your issuer mails you a few free personal checks along with your new cards. These checks may be considered cash advances if you use them.
Cash Advance ATM: You can withdraw cash from an ATM using your credit card. Like check cash advances, you may also have to pay higher APRs and fees.
Good signs to avoid a cash advance
1. If you don’t know how much it costs
Most credit card issuers charge a steep fee for these transactions, often a percentage of your advance or a flat rate. On top of that, you may have to pay a separate cash advance APR, generally listed in the credit card’s Schumer box, a table of additional disclosures included in credit card offers.
Cash advance APRs typically range from 2% to 5% more than your regular APR, and in many cases, interest will start accumulating as soon as you have the cash in hand. Plus, taking on a lot of higher-interest debt may drive up your credit utilization ratio, or the percentage of your credit limit you’re using, and hurt your credit score.
2. If you haven’t considered all your options
If you’re getting a cash advance for convenience, be sure you've looked at all your options before you complete the transaction. For instance, let's say you’re on a date at a cash-only restaurant, and you don’t have a debit card for the ATM. Getting a cash advance at an ATM might seem like the only alternative, but swallowing your pride and going home to get cash is still a much better choice.
Similarly, if you don’t have enough money to pay your rent, don’t think of a cash advance as your Plan A. Start by explaining your financial situation to your landlord and trying to work out a different payment plan. Trim your other expenses as much as possible. If that doesn’t work, consider moving to a less expensive place or asking friends, family or local charitable organizations for help. If you do lean on your credit, make sure you’re able to pay off what you borrow.
3. If you’re ignoring the real problem
Sure, cash advances may not be hurting you right now, but they may be symptoms of a larger issue that may harm your finances down the road. If you use cash advances to avoid overdrawing your checking account, for instance, it may be a sign that your fixed expenses are too high. A quick cash infusion might give you some temporary relief, but if you get to the root of the problem, you’ll be in better financial shape in the long term.
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