One of the benefits of having a credit card is the ability to obtain cash from your credit card when needed in the form of a credit card cash advance. To secure the funds you need, all you have to do it go to the nearest ATM, punch in your passcode, and wait for the money to be dispensed. Sounds like an easy way to get cash quick and repay it over time. Unfortunately, many people forget to review the terms and conditions of their credit card agreement before taking out a credit card cash advance and are unpleasantly surprised when they get their next credit card statement. Here are some things that you should know about a credit card cash advance before deciding to take one out.
Higher Interest Rate
The interest rate charged for a credit card cash advance is often much higher than the interest rate that you pay for purchases or for carrying a balance from month to month. The average interest rate for a credit card cash advance is currently 24 percent, with some lenders charging as much as 36 percent. While this is less than the rate you would pay to a payday lender for a two-week loan, it is considerably higher than what you would pay for a personal loan or to put a purchase on your credit card.
Interest Charges Begin Immediately
While purchases made on a credit card typically have a grace period before you are charged interest, the interest charges for credit card cash advances begin immediately. As soon as that money leaves the ATM, the lender is charging you interest on the amount withdrawn. Some people that are used to having a grace period for their purchases are shocked to find the interest for the cash advance on their next billing statement, even if they had already paid off the amount withdrawn.
Additional Fees For Credit Card Cash Advances
Credit card cash advances typically have an additional fee associated with them, over and above the interest you are charged for the cash advance. In many cases, that fee is 5 percent of the amount withdrawn. This would mean you would pay an additional $69 to take out a credit card cash advance of $1,000, even if you paid it off within 30 days because you would be paying $50 in fees and $19 in interest. These charges also apply if you use the “convenience checks” sent to you by the credit card company to pay expenses like rent or utility bills. Make sure that you know how much you will be charged before deciding to take out a credit card cash advance.