A credit card cash advance can be a quick and easy way to get cash. It can also be a quick and easy way to go deep into debt and rack up a lot of fees. Before you reach for the plastic, consider these for tips.

Most credit cards give you the ability to take a cash advance. This means that you can withdraw cash from a credit card simply by using it at an ATM machine. Many companies even promote advances. They send you blank checks with your paper billing statements. You can simply deposit them into your regular checking account and use the cash right away.

However, as easy and convenient as this sounds, you should keep a few things about cash advances in mind.

I was reminded of these things recently, in fact. A friend took a small cash advance from his credit card and faced a whole lot of fees of which he wasn’t aware. That’s why it’s important to pay attention to the fine print and take into account the following four facts about cash advances. They might save you a lot of wasted cash!

4 Things to Remember When Taking Out a Cash Advance
1. Higher APR 2. Cash Advance Fee 3. Repayment 4. No Grace Period

1. Higher APR

The cash advance APR for a credit card is usually much higher than its regular purchase APR. This means that you’ll spend a lot more to use that cash.

For example, my favorite daily-spending card is at 14.49 percent, based on my personal credit score. However, if I were to use that card to take out a cash advance, the APR on that money would jump substantially. It would be 26.24 percent! If I carried this balance (instead of paying it off right away), that interest could really add up quickly.

Oh, and as you’ll see in #4, below, this interest rate is even more of a whopper due to a special cash advance caveat.

2. Cash Advance Fee

Most credit cards will charge you a fee when you take a cash advance, which is standard. For example, the Chase Sapphire Card charges a transaction fee of 5% or $10–whichever is higher–when you take a cash advance. If you withdraw $100 as cash advance with that card, you will get a net of $90 after taking into account the cash advance fee. Take an advance of $1,000, and you’re talking about a $50 fee.

The card issuer will charge the fee up front or when your balance is due, depending on the credit card terms. You can get out of paying high interest on a cash advance by paying off the balance. But you’ll have to pay this fee regardless.

Between this and the interest rate, your fees add up quickly, huh?

3. Payment may be applied to a low APR balance first

If you are just paying your minimum balance due each month, your credit card company will typically apply the payment towards your lowest-APR balance first. They’ll only apply the payment towards higher-APR balances once you’ve paid off your lower-APR balances. So when you take a cash advance on a card already carrying a lower-APR balance, it could take you even longer to pay off your high–APR balance.

Let’s look at this with an example. Suppose you have a credit card that has an APR of 15.24% on regular purchases and 20.24% on cash advances. You make a purchase worth $100 and then take a cash advance of $100.

When your statement comes due, you send in the required minimum payment of, say, $50. (Maybe you even assume that $25 will go toward the purchase balance and $25 toward the cash advance.) Well, some credit cards will take this money and apply it toward lower-APR balances first. This means they will use the money to clear off half of the balance created with the regular purchases (which were only incurring interest of 15.24% anyway) before applying it elsewhere.

You will still have the full $100 outstanding from your cash advance. And, remember, the issuer is charging a higher rate of 20.24% on that. You may have saved yourself some money on the purchase APR. But the credit card company is going to come out ahead by earning even more on the full cash advance.

To avoid this situation, you should try and get a cash advance on a credit card that has little or no other balance (if you must get an advance at all). You should also pay more than the minimum payment due. While credit card companies are legally still able to apply the minimum payment to the lowest interest rate debt first, any payment overages (above the minimum) must go toward the higher interest rate balance.

So, every penny you pay beyond that minimum due would go straight toward your more pricey debt.

4. Cash advances don’t have a grace period

Here’s where even the most credit card-savvy could get tripped up and pay more than expected. This may come as a surprise, but credit card companies usually don’t allow a grace period for cash advances. This means that interest starts piling up the second you take the cash advance.

Most responsible credit card users are used to shopping on their credit cards and then paying the bill in full when their statement arrives. If you do this, you’re essentially granted a “grace period.” You won’t be charged a single penny in interest for those few weeks between when you make the purchase and when you pay the full balance.

However, this practice doesn’t work if you take a cash advance. Interest starts building from the moment the ATM spits out your cash. And it keeps adding up every day you don’t pay it off. By the time your statement arrives, the cash advance has already accrued interest. And there’s no way around it.

The key here is not to wait for the balance to be due. Pay off whatever you can, as soon as you can.

The best option is to avoid cash advances altogether. There are other options if you’re in a bind. For instance, you could try a personal loan. Many personal loan platforms can get you the money within a day or two.

Of course sometimes, despite our best intentions, things become a bit tight and we are forced to do things we don’t like. If that means you’re forced into a cash advance, at least do your best to pay it off as quickly as possible.

Next time you take a cash advance, keep these tips in mind. That way, you can minimize the fees you pay on such advances.

Topics: Credit Cards

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