Ways of Avoiding Debt When Using Cash Advance
When you take out a cash advance on your credit card you risk of running into an expensive debt in case you aren't able to repay it quickly. Keeping that in mind will help you make better decisions when you're about to swipe your credit card at the ATM.
Cash Advance and Its Four Costs
Cash advances are provided with fees, which usually make up from one to four percent of the advance amount. Cash advances also usually have higher interests if compared to regular purchases. You will not have a grace period with most credit cards when using a cash advance, which means that the interest starts accumulating the moment you take the money from the ATM.
And remember about the fee the bank charges you with for using their ATM.
These four expenses make cash advances quiet costly, yet not that expensive like other alternatives, like payday loans. If you know how to manage these fees, then you're in control of the situation.
Ways of Managing a Cash Advance
Review your credit card agreement to learn all the terms and fees. If there's something you don't understand contact the customer support.
Use cash advances only in case of emergency, such as unpredicted medical spendings. Don't use cash advance for purchasing goods or paying for gas?
Determine the cash advance limit of your credit card. In some cases the cash advance limit is actually less than the limit of your credit card. You will face higher interest rates when exceeding the cash advance limit.
Take exactly the amount you need, not a dollar more. Withdrawing some extra cash will result in a higher amount of money you will have to repay later.
Use a zero-balance credit card. In case you have several balances on your credit card the payments are first applied to the balance with the lowest interest rate. Your cash advance balance is the one with the highest rate and will increase with finance charges, which will result in difficulties when repaying it.
Restrict from purchases until you repay the cash advance, because of the same situation as above. Avoid using your credit card for purchases until the moment you can actually afford them.
Some Alternatives to Cash Advance
If you need quick cash often it might be a sign of a larger spending problem, like constant debt or inability to manage own expenses. In this case it will be much harder for you to repay a cash advance.
Think of some alternatives before taking a cash advance.
- Bank or credit union small loan
- Borrowing from family or friends
- Employer payday advance
- Extending the due date from your creditors
- Consumer credit counseling
- Emergency hardship programs in your area
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