Pitfalls Associated With Credit Card Cash Advance |
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Taking cash advance with
credit cards is anything but free money. It's a common mistake that credit card holders make in thinking cash through credit card is free money. Often people may take cash advance to be able to pay off existing credit card balances, using it as a temporary solution to credit problems. However this is actually among the worst financial decisions that a consumer can make as it only aggravates the problem. Eventually the borrower is required to pay the new debt at a far higher interest rate costing him even more money. Only informed consumers are aware that fees and massive interest rates are expected from cash advance. Cash advance can even be a hurdle for consumers requiring debt relief. A number of tips have been compiled for consumers to use in steering clear of the hazards that come with cash advance. The most dangerous outcome of all for consumers making the decision to get cash advance lies in the finance or interest charges. Cash advance usually has an interest rate much higher than the interest rate for normal purchases that include everyday card purchases. Rates for cash advance vary from 20% to 25%. Compare this to the average purchase rate for a standard credit card which is between 15.88% to 17.30%. If you plan to use your card for cash advance, find a card with a lower APR and lower fees on cash advance. There are some cards where the APR is higher for cash advance than for purchases. Finance charge dangers also include grace periods and payment methods. For cash advance interest begins instantly with no grace period of any type. Consequently even on payment of the balance in full when the bill comes, a finance charge will still apply for any advances. Similarly the method of payment on your account may also carry the risk. Most issuers apply payments to card purchases first and only then to cash advance. So if you have a balance on your card, it may significantly increase your finance charges and the overall interest rate as well. Also be aware that any credit card checks you may get are mostly taken as cash advance. Card issuers usually promote checks of this type as being an easy solution to pay off any bill you choose or a means of getting extra spending money. There's no doubt that a check may be convenient to use but it can be very costly too. Balance transfers are also often taken as cash advance. Cash advance fee is charged every time you use a card for cash advance. It can either be a flat fee of about $3.00 or a percentage of the cash advance amount, like 3%. Consumers have to pay back the amount taken as cash advance at a very high interest rate in addition to a cash advance fee. Thus a customer taking a credit card cash advance of $500 will end up paying more than $600 presuming that all payments are made on time and within a year. However if one is unable to make the payment in one year's time, then late fees have to be paid and the consumer may also have to pay higher interest rates. Also the rate charge may be fixed or variable in nature with the result that it can be confusing for the customer, with some companies using combine calculation methods that ultimately mean higher cash advance fees. If getting advance is a must, avoid doing so from ATM machines. There is an additional fee for cash advance from ATMs. This charge is levied by the financial institution owning the ATM. Depending on cash advance can be an obvious sign of serious debt problems. Consumers that have become regular users of advances to get by are in urgent need of debt counseling. Cash advances can prove tempting enough to make victims of cardholders in the cash advance trap which puts them in a vicious cycle. When it comes to cash advance, avoid it at all costs. It's always better to try to find alternative resources to get a loan that will solve your financial hardships. |
