Credit Cards Are Tricky Things

Category: Finance, Credit.

Credit cards are tricky things. This is especially the case when it comes to getting a credit card cash advance.

They can be life- savers in emergency situations, and they can be very tempting to use even when they re not needed. Most major credit cards allow you the option to withdraw a certain amount of cash against your line of credit. Here is a good rule of thumb: don t take out a credit card cash advance unless it s absolutely necessary, as in emergency situations. While this can be just as easy as visiting an ATM, you have to question whether the fees and interest incurred are actually worth it. This method should be your last resort, as you ll end up paying quite a bit more than you re actually getting in cash. While cash can be quite handy, you should always attempt to procure it interest- free, instead of through a credit card cash advance.

Don t be fooled into thinking that cash advances are the same as simply using your credit card. Before you decide to get cash from your credit card, make sure you are fully informed as to the regulations attached to this service. Rates vary slightly from creditor to creditor, but usually the interest rate on any cash advance will be between 20 and 25 percent. First and foremost, the interest that applies to normal credit card purchases is usually not the same for cash advances- -in fact, it s much higher. That s a lot of money! In other words, it doesn t matter if you re taking out$ 20 or$ 300, your credit card company could be charging you ten dollars just for the privilege.

Additionally, while some cards charge you two to four percent of the advance amount, most credit cards charge a flat fee for any cash you draw against your line of credit, regardless of the amount you take or how often you take it. There are also the ATM fees to account for. If you are advanced$ 100, you are actually paying closer to$ 140! So, after taking into account the amount of the withdrawal itself, plus a$ 10 fee( this is just an example as fees vary) , plus 25 percent interest, plus approximately$ 2 just for using the ATM, what is the total amount you re dishing out? Another downside to cash advances is that they carry no grace period. Many creditors also require that you pay down the balances for actual credit card purchases before you pay down the higher- interest cash advance balance. As soon as the ATM spits out that money, interest charges start stacking right up.

Why? You may think credit card companies are being sly, but all of this information is fully disclosed by law- -you just have to take the time to read it. Because they make more money that way. Believe me, it s better to know now than have it come as a shock to you later when your bill arrives. This holds true for every aspect of your credit card plan. If you re a current cardholder or planning to become one, you d be doing yourself a favor to read all that pesky fine print that typically accompanies credit card applications and statements.

Clearly, the positive side of using a credit card cash advance is far outweighed by what it can potentially cost. So the next time you re diving into another one of those instant approval credit cards, remember that even the most enticing offers can come with smoke and mirrors. Unfortunately, people typically resort to cash advances when they are financially insecure, which is also when they will be least able to handle the fees and high interest rates.

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