Can you withdraw money from a credit card? Of course YES! It is called cash advance on credit card. Popularly known as cash advance, it is a short-term loan that helps you pay off your sudden utility bills, medical expenses, education fees, major car break downs, other home needs, etc. effortlessly just like other cash loans.
How do you get a cash advance on your credit card? By now, you are definitely aware that you can get cash against your credit card’s line of credit. There are 3 well-known ways to get cash from credit card. But where? You can borrow at ATMs, banks or by using convenience check. However, there is a preset credit card cash advance limit that is lower than your typical credit limit.
Unlike other cash loans, where the money is taken out of your bank account, it is different with fast cash advance. Here the money is charged to the credit card balance. For example, if you borrow $150, it will reflect as $150 plus a fee for withdrawal on your credit card.
Wow! It looks like an easy way out. However, what you do not know is the other side, the darker side, of such cash credit. Firstly, cash advance loan is not a payday loan. Instead, it is an alternative to other cash loans. Many storefront payday advance lenders and payday loans online lender use the term ‘cash advance loan’ vaguely to promote their loan products. Do not get into trap; it could be a payday loan in disguise.
Why should you avoid credit card advances? The 3 big reasons:
#1. No grace period
When you pay off your credit card bill within a grace period that is typically 30 days, you are not charged any interest. However, this is not the case with credit card advance cash. You are charged interest right away. Meaning, by the time you have your credit card statements in your hands, you have already been billed interest on your cash advance.
#2. High interest rate
Mighty interest rates are another reason to stay away from credit card advance loans. When you compare the interest rate for purchases on credit card (an average APR of 15 %) with cash advance interest rate, you will realize that the latter is higher. Survey shows that almost 86 percent of cash credit comes with an APR above 20 percent.
#3. Less talked transaction fee
Nothing comes free, especially credit. When you request a credit card advance from bank, you are charged 5 percent of the amount borrowed as a transaction fee before you even get the money in your hands. Now you realize that along with your credit card company, bank is also tacking fees on the transaction for assisting you with the process.
Having known the biggest strikes against credit card advance cash, it is time to act wise. Remember that these are not the only option to bail you out of financial emergencies. However, if cash advance is your last financial resort, it is advisable to understand all the extra fees applicable and play caution while you use. Ensure not to use it as a long-term monetary solution.