- On February 1, 2019
Everyone finds themselves struggling for cash sometimes. Unexpected expenses can wreak havoc on anyone’s finances. In an emergency situation, many people rely on a cash advance from their credit card. However, this can carry steep consequences at times.
Many banks will charge users a fee to get cash from their credit card account. This is often an exorbitant fee to discourage people from doing it again in the future. Another downside to this is that taking cash can result in using too much of one’s available credit. In cases where a credit card has almost been used to its limit, taking an advance is even worse. When one does make a credit card processing payment, the money goes first towards paying off their balance. As a result, the cash advance stays on a credit card account longer than it ideally should. This leads to the accumulation of interest. A cash advance always garners more interest than standard purchases do.
It is best to only take an advance of cash if one can pay it back quickly. When choosing a credit card to take cash with, people are urged to use one with a low-interest rate. They can find this information in the cardholder agreement. Experts recommend only taking a small advance of cash. This avoids having to pay more interest than necessary.
There are cases where taking an advance of cash may not actually involve it. One example of this is credit card overdraft protection. When the bank takes the amount to cover the overdraft, they consider it an advance of cash. Another example is purchasing a money order or initiating a wire transfer. These are considered ways to advance cash from one party to another. It also applies to the purchase of Bitcoins and other digital currency with one’s credit card.
For the most part, people are urged to avoid credit card processing that produces cash. While it can be used in a pinch, it should not be used on a regular basis. Most of the time there are better ways to acquire needed cash.