Credit card cash advances
are amounts of money which people are permitted to "borrow" from their credit card companies. These advances are generally processed via ATM withdrawals or deposited checks. Unlike other types of loans, credit card cash advances almost always come along with hefty interest rates, usually notably higher than the interest rate of the associated credit card. Furthermore, the interest tied to credit card cash advances generally begins on the
one borrows the funds.
There are a variety of reasons why an individual may consider taking out a credit card cash advances. In most scenarios, doing so is ill-advised, but regardless of the decision which one ultimately makes, having an awareness of the following information is paramount.
There are Many Strings Attached
One of the massive pitfalls of credit card cash advances is the plethora of
. As previously stated, credit card cash advances generally come along with sky-high and immediate interest rates. ATM fees are also part of the deal, as are payment allocation rules. Of course, certain logistics will vary depending upon the bank/credit union and their rules regarding credit card cash advances.
At the end of the day, credit card cash advances are not truly worth it. The amount of money will which be paid in combined interest and fees will undoubtedly surpass the amount of originally borrowed funds. In essence, someone who takes out a $500 cash advance may wind up paying $1000 (or more!) by the time they've covered all of the subsequent monetary charges.
You Could Have Deeper Financial Issues
In light of the multiple expenses associated with credit card cash advances, resorting to taking one out could be indicative of deeper financial issues. In most cases, individuals who take out cash advances do so because they need cash, yet have no other way of getting it. Even in today's world, there are still certain situations where merchants may not accept credit or debit cards as payments. Unfortunately, there are other people who resort to cash advances for unwise purposes, such as gambling.
How to Steer Clear of Credit Card Cash Advances
It goes without saying that the pitfalls of credit card cash advances vastly outweigh the upsides. For this reason, people should employ the proper financial strategies so they are never completely unable to access cash if they truly need it. Thankfully, there are several ways of going about this. The first and most obvious strategy involves saving money. The amount of money which can be saved will greatly depend upon the amount of one's income and their expenses. Ideally, the former should always outweigh the latter. This, in turn, allows for people to gradually build an emergency fund to be used in times of need.
If someone's expenses outweigh their income, then the person has a few options: increase income, decrease expenses, or both. Income can be increased by seeking a raise, requesting additional working hours, or pursuing economic ventures outside of one's day job (such as
). Decreasing expenses is viable by simply reducing the money which is being spent. Most people do this by going out less often, canceling monthly subscriptions, and shopping with coupons. This may not seem glamorous, but it certainly beats having to take out a credit card cash advance due to a lack of funds.
Finally, the best way to avoid credit card cash advances is by always having some cash on hand. This could mean storing a few hundred dollars in a safe or keeping some bills in a wallet. Regardless of the financial means one takes to save money and maintain readily available cash, just about anything is better than taking out a credit card cash advance.
Authored by Gabrielle Renee Seunagal