What Is Cash Advance Loans?

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What Is Cash Advance Loans?

It’s bound to happen, you suddenly find yourself cash-strapped and you badly need money. Pronto! And someone out there suggests that you get cash advance. 

It’s true, one of the fastest ways to get money is through a cash advance — it is the most uncomplicated way to get cash in a flash.

However, sometimes getting something too easy and too fast may come with a cost. And a high cost at that. And a cash advance is one example of that. Cash Advances can actually cost you a ton of interest and fees. 

Therefore, it’s best to get to know what cash advance is all about before you take one out. You need to put in a lot of thought before jumping right in otherwise you will get hit with some unexpected and dreadful surprises in the future. Right from the start, it’s better to know upfront to just stay away from cash advances altogether.

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Table of Contents

Let’s take a look at the fundamentals of cash advances, including the fees and terms. 

Cash advances are essentially short-term loans offered by your credit card company. When you pull out or withdraw a cash advance, you borrow money on your credit card. 

This money is taken against the line of credit in your credit card. Sometimes, you can take it as fast as getting cash from an automated teller machine or an ATM. 

All you need is to acquire the personal identification number or PIN of your credit card, go to the nearest ATM and bingo, push a few numbers and your cash is there. However, it takes a couple of days before you get your personal identification number from your credit card company, and of course, you can’t just withdraw any amount you desire from an ATM. 

It goes without saying, there are limits to the money that you can withdraw.

Another way to get a cash advance is through convenience checks. The credit card company may issue a convenience check for you — and then you write a check to your name. 

Afterwards, you deposit it in your account or cash the check. Well, it’s certainly not called a convenience check for nothing. Or you can go to your bank in person and apply for a cash advance with your credit card. 

As you might have realized by now, getting cash advances is easy as pie and lightning quick. But beware — there’s a huge caveat involved in this seemingly easy way to get cash and it’s spelled with four letters — FEES.

Cash advances come with bulky costs, which in most cases are heftier than the advantages. First of all, you will run up with the cash advance fee. Typically, the cash advance fee is between 3 to 5 percent of the total sum of cash you ask for. 

Case in point, if you get a $200 cash advance, it’s usually topped with a 5% cash advance fee amounting to $10. That’s one fee to deal with.

Then you have the ATM fee. If you think using an ATM comes without a cost, then you’re wrong. The same thing goes with visiting the bank. 

It also involves a bank fee. You will also need to deal with a Cash advance APR. Cash advances have a distinct and more costly interest rate compared to usual balance transfers or your regular credit card purchases and acquisitions. 

Some credit card companies add a whopping 25.24% variable APR for cash advances. Let that amount sink in your mind.

One more thing that you should note is there is no such thing as a grace period with cash advances. You will be charged with interest the moment you take out the cash. 

When you purchase something with your credit card, the credit card companies usually give you at least three weeks of grace period with no interest as long as you pay your credit card dues in full at the right date. 

Aside from that, cash advances have unique credit limits separate from your overall credit card limit. That means you might just take out less money that you expect.

With all the terms and fees mentioned, bring out your calculator and start counting the cost. Ask yourself the question, is this all worth it? 

So before you take out cash advances, do the math, evaluate and analyze the costs involved to avoid unpleasant surprises.

This will bring us to the next question on top of your head, are there better options for getting quick cash? 

 

Yes, there are. If you don’t want to rack up your payables and outstanding debts, shun cash advances like the plague. 

Why to try taking out a personal loan instead? 

A personal loan gives more friendly terms compared to cash advances. 

Not to mention, you will get more money and pay back the loan at a fixed interest rate, much lower than the hefty fees charged by the credit card companies. 

Another way is to ask friends or relatives if you may borrow money. 

It’s agonizing and embarrassing or there’s this fear of getting rejected. But it’s a good value for both sides if you pay them back as you have promised.

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