Credit card cash advances

Most of the credit card companies allow you to have access to cash advances as well. Cash advances allow the cardholders to withdraw cash out of ATMs in the same way as they would with a check card or ATM card. This is the reason why you’re given a pin number when you open a new credit card.

Difference Between Cash Advances and ATM’s
When you withdraw cash from an ATM, the amount is deducted from your bank account. On the other hand, cash advances are deducted from your credit line instead of your bank account, and carry costly fees and high APR.

There is no grace period in cash advances either, and so the interest begins accruing the minute you withdraw the cash. In fact, cash advances are probably the most costly credit option available.

Cash Advance Fee
Most credit card cash advances come with an APR of 20% or above, along with a cash advance fee which is typically 3% for each cash advance, starting from a minimum of $5.
Thus, not only do you have to pay an extremely high APR, you also have to pay a fee each time you take out a cash advance. Not to mention the ATM fee if you don’t use an ATM from your card issuer’s network.

Also, if you are already carrying additional balances on the credit card, lower APRs will be paid off first, so you may be stuck paying 20% APR or higher on those cash advances until all other debt is paid off in full. This could lead to an accumulated amount that is much greater than you actually took out or spent, which is the main reason behind discouragement of cash advances.

Use Cash Advance Only In Case Of Emergency
A cash advance should be used only in case of an emergency, when you don’t have any other choice but to withdraw cash using a credit card. But if you use cash advances frequently, you would simply be throwing away your money to fees and finance charges.

Convenience checks are also treated as cash advances by some issuers, although some do come with an introductory 0% APR, so they may serve a better purpose than a cash advance.

But it is better to use cash advances only in case of an emergency, when urgent cash is required, so that you can avoid paying enormous amount of fee.

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