Credit card cash advances had become a go-to solution for business financing since the financial crisis, when traditional banks were less inclined to lend.
They come with high transaction fees and interest rates that can quickly add up, but there are steps you can take to minimize them.
What is a cash advance?
Cash advances are credit card transactions that allow you to withdraw cash quickly and conveniently. There are a few different ways this can happen: In person: Some cards allow customers to get a cash advance at their bank or credit union with help from a teller; this may involve using convenience checks that draw upon your limit in exchange for immediate cash, with any subsequent deductions coming off of it when cleared by your bank.
Although credit card cash advances may seem similar to debit card withdrawals, they come with much higher fees and interest rates. Furthermore, using one can raise your credit utilization ratio as well as be seen as new debt on your report – potentially harming your score in the process. For this reason alone, cash advances should only ever be considered when needed – peer-to-peer money transfer apps like Venmo or MoneyGram might provide better alternatives that allow users to send and receive money without incurring a fee or service charge.
How do I get a cash advance?
There are multiple ways you can obtain cash advances, from using ATMs with PIN access for credit cards that accept them to visiting banks in person or contacting your credit card company online or over the phone, peer-to-peer money transfers through apps like PayPal and Venmo, bill payment services such as MoneyGram or convenient checks provided with some cards that enable you to write yourself checks to access cash advances.
Be mindful that cash advances typically carry high fees and interest rates, and should only be used as an absolute last resort in emergency situations when other options have failed. Savings accounts or alternative borrowing methods like personal loans and payday lenders may provide better alternatives than cash advances for emergency situations. It is wise to create an emergency fund instead. Also make sure not to charge expenses you cannot immediately afford to repay via a cash advance transaction.
What are the pros and cons of getting a cash advance?
People sometimes find themselves in situations that require cash, such as buying food from street vendors or paying for an event with cash-only ticket booths. Credit cards may provide a convenient means of quickening cash flows; however, cash advances should always be avoided where possible.
Cash advances typically incur fees and interest is immediately accrued as it’s considered “debt-like”, increasing your credit utilization rate and thus total available credit.
Another way of accessing cash quickly may include using a debit card or personal loan (though this requires more work and may take longer). These methods are much less costly than cash advances and easier to pay off than credit card balances that accumulate fees over time. A 500 Cash Advance can really help.
Are there any alternatives to getting a cash advance?
Cash advances can be an expensive way to access money quickly, often as an irresponsible measure when there are more viable solutions available.
One option is borrowing cash from friends and family. This can be an efficient and economical solution if an agreement can be made beforehand on how the cash will be repaid.
An installment loan could also be an option. These short-term loans usually provide a lump sum upfront that must be repaid in fixed monthly payments over time; usually within several months or years.
Finally, a line of credit is an adaptable loan that allows you to withdraw funds at any time up to a specific credit limit. While interest will accrue on anything you withdraw, this can often be less costly than cash advances or personal loans and may even waive transaction fees or have lower APR than traditional cash advances.