There are many times when a situation which cannot be taken care of with a credit card may arise. Maybe your car broke down, you had to take a last minute cab ride or maybe you need to pick up a few things to hold you off till payday. On these occasions having cash in hand is a way better than plastic.
But what if the money left in your checking account is not enough to cover it all? A great way to get cash fast is by taking out a cash advance on your credit card. This seems quite convenient being as a cash advance is simple to acquire and you do not need to have a certain balance in your account to do so.
Although it does seem convenient you may be wondering if it is something you should do, here is a bit of information on the subject which may help you make that decision.
What exactly is taking a cash advance?
A cash advance is a short term, loan which is taken against your credit card. There is of course a limit however instead of it being a short term loan as when you purchase with a credit card it is a cash loan, meaning your loan will be in the form of cash. You will be able to withdraw this loan from your credit card not your debit card at the ATM.
Keep in mind however that most credit card companies do not permit you to take out a cash advance for the full amount of your credit. Generally a cash advance is only given for a few hundred dollars. This of course means you cannot depend on your credit card to allow a large amount of cash even in an emergency situation.
It Can Be Pricey
Although getting a cash advance is pretty simple it can be a very pricey way of acquiring cash. This is due to the many fees and expenses associated with getting a cash advance, expenses which do not exist with a simple ATM withdrawal. Every cash advance has fees which can be two to five percent of the advance amount. So let’s say you get a cash advance of three hundred dollars on a credit card which has a four percent advance fee you will be charged twelve dollars merely to obtain the cash as well as any ATM fees there may be.
The priciest aspect of taking a cash advance is in fact the interest you will be charged, there are two ways in which this can be costly. For starters the interest rates on cash advances is generally much higher than credit card interest rates, but that is not the worst part. The interest on a cash advance generally begins accumulating from day one, no grace periods are provided. In other words the second you take out a cash advance you want to pay it back asap.
Assess Your Finances and Consider All Your Options
If you are considering taking a cash advance regardless of the high interest it may be an indicator of your financial situation being serious. A cash advance should be only used as an option in a very extreme situation. It may be best to try to restructure your finances and maybe consider other options. You could consider taking a personal loan, borrowing from family or friends and even overdrawing on your car which will not be nearly as expensive as a cash advance. Before you make a final decision look at every possible option being as the decision you make could be an expensive one.