Posted on Friday 13 September 2019
Let’s face it: not having cash on hand can be frustrating. Credit card bills, car payments, and rent schedules don’t always line up with our paycheques, leaving us strapped for cash at the last minute. We’ve all been there!
Add in the last-minute expenses like having to replace the brakes in your car, purchasing a new water heater, or—knock on wood—accidentally dropping your phone in the toilet, and you could easily find yourself in a bind.
Saving for emergencies is not as easy as it sounds. In fact, only 25 percent of Canadians including recent college graduates have money set aside in a rainy day fund. When an emergency hits and your wallet is light, cash advances are a great way to get access to the funds you need,—especially if you need it quickly. This is one of the benefits of saving money. Whether you're preparing for maternity leave or you're getting ready to leave your parents' house, it's crucial to keep some funds safe for the purpose.
But what is a cash advance and how does it work? In the sections below, we’ll dive into all of the details of cash advances to help you make the best choice for you—and your wallet.
A cash advance is a short-term loan that has one sole purpose: to get you your money as quickly as possible. Short and sweet, right? Well, there are actually a few subtle differences in how you can get a cash advance (and how this type of loan works). There are two ways that you can get a cash advance:
These days, most credit cards offer a cash advance option. This lets you borrow against your available credit to get access to funds quickly. If your credit card has a pin attached to it, you can simply go to an ATM and withdraw cash, just like you would with a debit card. If not, you’ll need to find a bank that offers cash advances through your network (Visa, Mastercard, Discover, or American Express).
Using a credit card for a cash advance can be a quick fix to an empty bank account, but there are a few disadvantages to consider before you start opening your wallet:
If you only need a couple of hundred dollars—and you’re willing to put up with the extra fees and higher interest rates—using a credit card for a cash advance could be a good solution. Building a great credit rating even while taking loans shows you have the financial discipline required to become a venture capitalist.
But what can you do if you don’t have a credit card, or if you’ve already maxed out your line of credit? What if you need more than what your credit card will let you borrow? Luckily, there is a second option: payday lenders.
Payday lenders offer short-term loans that are borrowed against your next paycheque. In this scenario, your cash advance will need to be repaid when your next paycheque comes in (although some lenders will allow for longer-term loans). Similar to a credit card, taking out a cash advance with a payday lender lets you get money quickly, bypassing the long wait times from traditional lenders, like banks or credit unions.
So what’s the difference between getting a cash advance from a payday lender instead of using your line of credit? Here are a few key reasons why using a payday lender might be a better option for you:
If you have a steady, reliable source of income and can pay back your loan in a short period of time, getting a cash advance through a payday lender is a great option. This process lets you get cash fast without jumping through hoops—which is the last thing you’ll want to do when you’re strapped for cash!