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Cash Advance: Just Say No | |
 With times being tight for many consumers, it can be easy to run out of money before the next payday. The phrase "living paycheck to paycheck" doesn't seem to even apply for many of us anymore because the money just isn't stretching.
People need cash and when they do, it can create a somewhat desperate situation for some. Besides fantasies of robbing a bank, many will do other things to get cash that are just as foolish.
Case in point - taking a cash advance
When you have a credit card, the financially intelligent thing to do is to save that card and only use it in emergency. The reality is, many people who are not doing so well financially will make the first mistake of using their credit cards to sustain daily life. When the time comes for cash to be needed on hand, people will make another vital mistake and use that credit card to withdraw cash. These cash advances added to an already poor financial situation will only make things worse.
Here are some of the reasons you should avoid taking a cash advance from your credit card. Remember that a cash advance isn't just when you use your credit card at the ATM, it also counts when you use convenience checks sent from the credit card company:
Outrageous fees
Where many people fail themselves is in part due to the particularly small print that contains the information on the interest rate applied to a cash advance. Card holders do not always take the time to read exactly what they are doing when they take a cash advance from their credit card and then wonder why they are paying up to 25%-30% in interest charges.
Unbalanced pay offs
Few consumers realize that when they make a payment on the balance of their credit card, the credit card company typically will apply the amount to the balance with the lowest interest rate. Because your payment does not technically go towards your entire balance at any one time, you can end up paying for that cash advance for many years to come.
No grace
The grace period on a credit card is the time you have to make a payment before the interest charges accrue. When it comes to a cash advance, most credit card companies do not give a grace period on cash advance transactions. This means you end up paying more than you would on regular purchases.
Double fees
When you use your credit card at a bank ATM or the teller window, you may incur additional fees for the transaction. Not only do you end up paying outrageous interest for the money, you likely will end up paying off the extra fees for a long time to come, no matter how small they may seem at the time
Before you turn to a cash advance when you need cash, try hard to come up with other ways to get cash in hand. Sell things you own or borrow from a family member. Do whatever you have to to not dig yourself into further debt.
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