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Everything you need to know about cash advance

Everything you need to know about cash advance
Getting cash on your credit limit is called a cash advance. It’s one of the most convenient ways of getting the money instantly but at a cost. You should only resort to getting a cash advance if you have no other way of getting cash on hand, especially if you’re in an emergency where card swipes are not possible.
If you’re thinking of getting a cash advance soon, let’s clear the air regarding them. Here are some things you should know regarding cash advances.

What is a cash advance?

A cash advance is a type of short-term loan that you can get from your bank or a lender. It also refers to a type of service that credit issuers allow you to take whenever you need it. However, they are generally known to have steep interest rates and high fees. Nevertheless, it’s still very attractive to many borrowers since they offer fast approval and quick funding.
There are two types of cash advances for personal finances, mainly credit card cash advances and payday loans. Payday loans are suitable for people with bad credit, but if you’re looking to get cash advances with bad credit, there is also a bad credit cash advance option available.

Credit card cash advance

The most popular type of cash advance that people commonly go for is credit card cash advances.
A credit card cash advance allows you to borrow money from your line of credit on your credit card. The money can be withdrawn from an ATM or directly from the bank. Credit card cash advance typically has a high-interest rate, which is higher than what you get from a regular purchase using your credit card.
And usually, the interest also accrues immediately, which means there are no grace periods for credit card cash advances. Credit card cash advances also typically carry a fee. The amount will either be given through a flat rate or a percentage of the amount you borrowed for your cash advance. Getting a credit card cash advance from an ATM also has a small transactional fee.
It’s also important to know that credit card cash advances carry a separate balance and have a different interest rate. However, the monthly payment still applies to the credit card cash advance.
Also, if you’re paying the minimum amount due, the bank is allowed by federal law to apply it to the balance with the lower interest rate. It means your credit card cash advance can have a high-interest rate if you don’t pay it immediately.

Payday loans

This one you have probably heard of before. Payday loans often have a bad rap because of the steep interest rate, but it all comes down to financial management. So how does a payday loan work? Payday loans are also short-term loans you must pay for with your next salary.
Typically, you can apply between $500 to $1,000, but that differs from lender to lender. However, the best thing about payday loans is that they are fast and easy to obtain. You can apply for one today and possibly get the money by tomorrow.
Take note that if you can’t pay the loan immediately on your next salary, the interest rate will increase, and you’ll pay the lender a fee.

Impact on your credit score

Getting a cash advance doesn’t directly impact your credit score, but it can still affect you in various ways. First, by taking out cash advances, you’ll raise your balance, which will affect your credit utilization rate.
Your credit utilization rate is a huge factor in determining your credit score, so the higher your credit utilization ratio is, the more points you’ll lose in your credit score.
Second, it will affect your debt. Since they often carry steep rates, there’s a chance that it will hinder your ability to repay them. If you fail to repay a loan, that will significantly negatively affect your credit score.

Cash advance alternative

Cash advances are great, but if you’re looking for alternatives, there are a few that you should look into. The main one is a personal loan.
Personal loans are much harder to get compared to cash advances. However, they offer a lower interest rate and monthly repayment. Personal loans are also more suited to bigger purchases than cash advances that are more commonly used for smaller purchases.

Final words

Cash advances are a convenient way of getting emergency funding. However, it doesn’t go without cons. From high-interest rates and possible negative impacts on your credit score, it seems that cash advances aren’t worth it. However, if you’re responsible with your monthly repayments and looking for a fast and easy way to get funding, then cash advance has your back.

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