How does credit card cash advance work
Credit is good with its cash value. It is the principle of credit card cash advance. It is not obligatory to simply use your credit. You can convert this credit to cash. Many things we need requires cash, especially in emergencies.
How it works?
Credit card cash advance option allows to use credit cards as debit cards at all ATM card systems. However, you have to pay all fees associated with using the feature and determined by the bank responsible for ATM machine and by your bank.
Traditional credit card cash advance applies to a permitted credit limit. With debit card, you can take out money that has earlier been deposited into your bank account (it's like check purchase or cash). With credit card you can spend credit (thus cardholder creates a bill, which will be paid later). Credit card with cash advance option can be used for much more withdrawal transactions than ATM withdrawal.
Cardholders have to pay a high APR rate for cash advance options. As usually cash withdrawals is much more expensive than standard credit card debt.
There are some situations when getting cash advance money becomes the most useful option. For example, if the client has active credit card but he/she has bad credit, which disqualifies him/her from personal loan. Remember that cash advance withdrawal is not the same as cash advance loan.
In addition, you should know that if you're trying to do bank-to-bank transfers using cash advance option, the whole process can take several days.
Pros/cons of withdrawal cashing from credit card
+ You can use cash advance money to pay bills, solve emergency problems, or to lend to others.
+ You can get cash within minutes if you have an ATM card.
+ Cash advance is the only alternative when you have bad credit and if you have open credit card.
+ You can spent money to anything you need.
- These transactions carry high APR, that is higher than purchases.
- Encourages impulse buying that can lead to larger debt.
- Encourages long-term loans.
- Additional fees for each transaction from multiple banks.
How to get cash advance?
- You may go to bank that accepts your card. After the authorization, the teller will run your card through the terminal.
- You can go to ATM and get cash by sliding card into a slot and keying in PIN-number.
- You can make purchases at retail outlet and receive cash back.
If you want to apply a credit card then you can use bank and card comparison website to choose the most appropriate product.
How much cash can a cardholder withdraw?
Customer can get cash up to cash advance limit. It must be lower than the limit he's given for purchases. It is recommended to check the latest copy of creditcard statement (to login online account) to find out the cash advance limit and the sum of credit that's available for it.
When cash advance isn't a cash
There are bank transactions that are considered as cash advances even cardholders not physically withdraw cash (money orders and wire transfers purchased with credit card). An overdraft amount can also be treated as cash advance, if the creditcard has an overdraft protection.
Why cardholders should avoid creditcard cash advance
Many credit cards give the ability to take out cash in ATM. While your bank may make it very easy to take cash, you have to avoid this option as far as it possible. Cash advance option is expensive; therefore, it can easily lead to debt.
Creditcard cash advances are expensive because of:
- cash advance charge. It typically ranges from 2 percent to 5 percent of cash advance amount;
- ATM fee. In addition to cash advance fee cardholder will be charged an ATM fee ($2-$5);
- no grace period. As a rule, there is no grace period for cash advance. Interest starts accruing the day the cardholder takes the advance. If there is the balance on the credit card, try to clear it asap;
- higher interest rate. Cash advance has a higher interest rates than a rate for balance transfers or for purchases. Thus cardholder will pay more interest on $300 cash advance than on $300 plane ticket. Moreover, the longer it takes to repay the cash advances, the more interest customer will pay.
Cardholder who takes out cash advances is more plausible to default on credit cards than client who does not.
2015.07.06 Olivia D.