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How Credit Card Cash Advances Work and Alternatives to Consider

iCrowd Newswire
23 Nov 2022, 23:02 GMT+10

Sometimes, people need cash fast to cover essential or emergency expenses, whether they need to make a purchase at a store that only accepts cash or pay bills in cash. In this case, they could use a credit card cash advance, but this can come with numerous downsides.

This article will explain how credit card cash advances work and a few of their drawbacks. Then, we'll dive into a few alternatives that may be better financially.

The downsides of credit card cash advances

A credit card cash advance is a service that allows you to withdraw cash from your credit card account. This can be helpful in a pinch, or if you need money for a large purchase. They have their uses, but also have downsides that make them a bad idea for many:

High APRs

Credit card cash advances have separate APRs higher than your regular purchase APR. Additionally, interest starts accumulating immediately. This can add up fast.

Cash advance fees

Many cards charge cash advance fees on top of the high interest. Plus, if you use an ATM that isn't in your issuer's network, you may owe additional ATM fees. This makes credit card cash advances one of the most expensive ways to borrow.

Potential credit damage

Credit card cash advances aren't treated separately by credit bureaus. But keep in mind that they can raise your credit utilization, or the ratio of your credit balances and credit limits on each card and across all cards. Higher credit utilization can harm your score. Plus, if the cash advance makes it harder to keep up with your bills, you risk missing or being late on a payment. This will hurt your credit as well.

Less protection against theft

If your cash is lost or stolen, you have no recourse for getting it back. On the other hand, if you lose the credit card itself, your issuer may waive any fraudulent charges and get you a new card.

Credit card cash advance alternatives to consider

If you need cash quick, skip the credit card cash advance and consider these alternatives instead:

1. Installment loans

Installment loans are lump sums of money you pay back in fixed monthly payments of principal and interest. These are easy to budget for since the monthly payments are the same each month. You can get installment loans from banks, credit unions, and online lenders.

2. Title loans

If you own your car outright, you can use the title as collateral for a title loan. Title lenders appraise your vehicle, then offer you a title loan worth 25% to 50% of the car's value. If you accept, you can continue driving your vehicle while the loan is outstanding. These loans are often due 30 days from when you borrow them, but some may last longer.

3. Cash advances

Cash advances are small-dollar loans that can give you a few hundred dollars to cover expenses before your next payday. Cash advance lenders will want proof of income and employment along with a post-dated check or your bank account information. Luckily, many lenders come with less strict credit score requirements, so you may not need good credit to get approved.

Once approved, you get a loan due in two to four weeks - usually the same length of time as your pay period. When the loan is due, the lender will deposit your post-dated check or draw from your bank account to recoup the loan plus fees. You can also pay them manually.

If you can't repay, you may be able to roll over the loan for an additional fee. Be careful, though, as you risk getting stuck in a cycle of rollovers. Budget for your cash advance to avoid this issue.

The bottom line

Credit card cash advances can help you access cash fast. However, their high interest, cash advance fees, and potential out-of-network ATM fees make them an expensive way to borrow money. Plus, they can damage your credit by increasing your card balance.

Instead, consider installment loans, title loans, or cash advances. Installment loans can be great if you want predictable payments over a longer period. Title loans can be a good tool if you own a vehicle outright, whereas cash advances might work well if need a few hundred dollars while you're waiting on your next paycheck. Make sure to compare lenders when looking to borrow cash fast to minimize interest and fees on the money you need.

See Campaign: https://www.iquanti.com

Contact Information:

Name: Keyonda Goosby

Email: keyonda.goosby@iquanti.com

Job Title: Consultant

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