Owning a credit card is ultimately convenient, especially when you are stuck in times of emergencies. One particular cash advance perk allows you to easily withdraw cash using your credit card, as long as you have not reached your credit limit just yet.
Although a credit card cash advance can be convenient, there are a lot of drawbacks and disadvantages to it. It is different from withdrawing cash from your atm or debit card, and we advise you to never use this service unless it’s an emergency such as paying for your overdue car financing debt, mortgage, illness in the family, and etc.
Below are three reasons why you must never use your credit card advance.
The Fees are Outrageous
Cash advance fees are different from credit card rates and interests. Most credit card companies and banks charge 5 percent of your total cash advance, or a fixed rate, whichever is higher.
For example, if the cash advance fixed rate fee is $5, and the cash advance that you got is $50, then you would have to pay $5, since 5 percent of $50 is only $2.5. However, if you got a cash advance of $150, then you would have to pay a fee of $7.5, which is 5 percent of your cash advance amount.
Cash advance fees are almost higher than any other interest rates for services available to the public. It is often higher than purchases for when you swipe your credit card, and even has higher interest rates than balance transfers. Also, the longer you take in paying your cash advance debt, the bigger your interest grows.
Grace Period is Not Allowed
Unlike with simple credit card debt, there is no grace period for cash advance. The moment you get a cash advance, your interest starts rolling off. If you already got a cash advance and you want to avoid paying more for it than its intended interest rate, then go ahead and pay that debt as soon as you can.
Aside from the cash advance fee mentioned earlier, you also have to pay for other fees such as the ATM fee. This ranges from $2 and up, depending on your bank or the ATM that you are using to withdraw money from. If you are using a different ATM than that of your credit card’s, then both the bank who issued your card and the bank that you withdrew cash from may charge you with fees.
Avoid getting a credit card cash advance as much as you can. Having multiple cash advances can lead to multiple debts, which can eventually lead to a bad credit rating and report. Remember to always be responsible, and only use the service if you have run out of options.