All is fair in love and war. Yet, the financial side is no exception, too. In times when you are looking for credit card companies options to get funds, a credit card cash advance would be the solution.
It could be expensive, yet convenient and fast. If you are about to receive a cash advance on your credit card, learn its pros and cons first. At the end of the day, it’s better to foresee the danger in the beginning.
Cash Advance Meaning
Using a cash advance from your credit card can be costly, but it provides quick access to funds. Even though credit cards are accepted in large establishments in almost all countries, you still might need money. In such a case, it works as a perfect way to get money quickly.
After all, you can head to the nearest ATM to access the money. Convenient, right? But the cost of this convenience can be quite high.
So, how does credit card cash advance work, and what it is? At its most basic, it means taking out a small but very expensive loan from your credit card. In other words, a cash advance is a short-term loan secured through your credit card. It’s important to note that the interest begins accruing once the cash is dispensed.
How to Get a Cash Advance on a Credit Card?
Before you opt for a cash advance, it makes sense to learn how it works, especially if you’re choosing which credit card to get.
You simply head to the bank or you can get cash from an ATM. You only withdraw the amount up to your card’s limit. To add, no need to pass a credit check when you need money immediately.
Unlike the cash withdrawal from a debit card, the money you take out from a cash advance isn’t yours. As a result, you borrow money from your credit card’s limit that must be paid back in full with interest. Simply put, you use your credit card to buy money.
But there are some differences – the amount you can borrow when borrowing against your credit, how you can repay it, and the cost of borrowing. Before you even consider a cash advance, make sure you meet the cash advance requirements. It always makes sense to check your cardholder agreement first.
If you’re considering a cash advance, keep in mind that it can affect your credit. Different credit cards may have varying terms and conditions for this type of cash advance.
For instance, some providers like Capital One may have specific rules and fees associated with their cash advance feature. Be sure to understand how to use a credit card for this purpose and its potential impact on your financial situation.
What Is a Cash Advance Fee?
The reason why this financial option is rarely recommended is the high cash advance cost associated with it. Without a doubt, it’s more expensive than regular purchases you would do with a credit card. Below you’ll find things to consider about the cash advance fee.
- There is no grace period or interest-free window.
- Cash advance fee has a higher interest rate – APR charges of 19% to 24% (depends on the creditworthiness of the cardholder).
- Transaction fees – $10 per transaction.
- It often includes additional upfront fees – $3 of the advance.
- There is a chance that cash advance hurt your credit score down the credit line (if missed payment).
- Cash advance at an ATM may also incur an ATM usage fee – $1 (out-of-network ATM fees).
At the end of the day, the total of all fees for the $100 cash advance could be as little as $13. Thus, you pay $13 for the use of that money for one month. Sometimes, when you think that a cash advance is convenient, keep in mind that banks will charge you for that convenience. Consider exploring alternatives to a cash advance to avoid these high fees and interest.
Cash Advance APR
The reason that could stop you from taking a cash advance is a higher APR than the one for ordinary purchases. This annual percentage of interest you will pay may be as high as 25 percent. And here is why.
When you buy something with your platinum secured credit card, a bank receives a percentage of your purchase from the merchant. Say you buy a brand-new computer on your credit card. Theoretically, if you don’t pay your credit card issuer back, a bank has the ability to repossess the item.
With a cash advance, taking cash back from the bank gave you is impossible. As a result, a bank stands more to lose and increases the rate associated with a cash advance to make up the difference in bank profits.
If you’re considering taking out money from your credit card, it’s crucial to carefully weigh the implications, especially if you have existing credit card debt.
Cash Advance Limit
It depends. Well, a bank understands credit card cash advances as a possible sign you’re in financial trouble. It understands it takes a risk. Generally, your limit is significantly lower compared to purchases. The latter has nothing to do with your credit card limit.
Typically, it fluctuates between 20% and 50% of your total spending limit. A general rule of thumb is the limit associated with cash advances is about 20 percent of the total credit card limit.
For example, a card with a total credit limit of $5,000 would carry a cash advance limit of roughly $1,000. So, if you’re looking for a card to get cash from, be aware that the cash advance limit is a fraction of your overall credit limit, and it’s essential to understand the terms and conditions before opting for a cash advance from a credit card.
How to Get Cash from a Credit Card without Cash Advance?
In times when unexpected emergencies make your head spin, you’re ready to opt even for the most expensive offer but get the funds you need. Yet, even in the darkest times, there are strategies or alternatives that would help you avoid credit card cash advances.
So, how to withdraw cash from a credit card without a cash advance? Know your options.
- Overdrawing your checking account. If your bank allows, consider using this option. You can’t avoid a fee, yet the withdrawal is probably not subject to any interest.
- Apply for a personal loan. Whether it’s a secured or an unsecured personal loan, you can use it for any purpose. Interest rates tend to be lower and come with no origination or application fees.
- Transfer the balance to a zero-interest card. If you’re a well-behaved credit card holder, it’s time to make an exception. Transfer a big balance to a card with zero interest to use the money you would use as a cash advance.
- Purchase a prepaid gift card. There are several online marketplaces that sell debt gift cards which you can sell at a higher price to get the money you need. It would be great if you could get a little extra to cover your interest charges.
- Salary advances are an excellent option if your employer practices such an initiative. But first, learn the fees and interest rates first. It should be worth doing only if you know what exactly you’re getting into.
- Borrow from your 401(k) plan. It is a way to ‘borrow from yourself’. Keep in mind that the interest you will need to repay could be double-taxed.
- A loan from friends and family could also be an option. If you find that comfortable, use a written agreement to spell out all the terms.
In case, there is no other way but a credit card cash advance, minimize the amount you take. Calculate how much it might cost you so you fully understand what you’re getting into. Remember to check your credit card statement to see the full cost of a cash advance.
Cash Advance on a Debit Card
A debit card cash advance is a great option for those who need money fast. But it works a little differently.
To obtain a cash advance with a prepaid card, you need to go to a local bank or credit union branch and request an option. Sure, there will be a fee, but a usually small percentage of the total amount withdrawn.
It’s a good way to take out a lot of money. When it comes to credit cards at an ATM, there’s a daily limit on how much you can withdraw. Usually, it’s somewhere between $300 to $500. In case, you need to take out thousands, it is the solution.
Also, you are not limited to your bank only. There are a lot of other financial institutions that offer such cash advances. And finally, they don’t carry interest. Typically, the fee will not be higher than the rate for your standard transactions. Calculate how much it might cost you. Odds are, that could be a much cheaper option for fast money.
Credit Card Cash Advance Without PIN
What is a credit card cash advance without a PIN? In most cases, to take out a cash advance, you’ll have to request the PIN. The only way to do that is to send an email and wait up to 7-10 days until it’s ready. When you need cash now, that would be an obstacle.
There is an alternative method you can explore. Visit your bank’s teller and inquire about a cash advance. To confirm your identity, bring along your driver’s license or passport. If you struggle to remember your four-digit PIN, this approach is your ticket.
Regardless of whether you use a PIN or not, exercise caution before opting for cash advances. High-interest rates and the absence of grace periods should raise red flags. Depending on your financial needs, you might have more sensible alternatives at your disposal. Consider the pros and cons of cash advances before making a decision.
How to Minimize Credit Card Cash Advance Fees
There are several ways to lower the cash advance charges on your credit card, especially when cash advances come from a portion of your credit line. You need to:
- Understand Transaction Fees
Some fees, such as cash advance interest, are a flat rate or a mix of a percentage of the transaction and a flat rate, depending on your credit and the available line of credit. Other fees are a certain percentage of the general advance.
In the first option, you may want to withdraw a total amount of cash you will need to cover immediate financial issues instead of making several smaller transactions, but keep in mind that they may charge a cash advance fee.
If transaction fees for your card present only the second option you may decrease them by withdrawing only the amount of cash you urgently need.
- Repay It Quickly.
The interest on your cash advance transaction, which you incur when you apply for a cash advance and select the cash advance option, starts to accumulate the day you withdraw the funds. This interest is often a percentage of your credit, unlike common card purchases, which usually have a grace period without any fees. Hence, your aim is to try your best and repay the debt as fast as you can to save your funds in the long run.
- Choose the Most Suitable Credit Card
The key to having lower rates is to find the most affordable card, as it’s an easy way to get cash from your credit card. Search for lower fees and better rates if you plan to withdraw funds and take out a cash advance once in a while. This ensures you have the right credit card to take advantage of cost-effective options when you need to access cash.
When You Need Cash Advance Credit Card
This can be a decent lending solution only in case of a sudden emergency. The cash advance on the credit card can be rather expensive so you don’t want to use this option frequently.
If you can’t qualify for other borrowing options, don’t have enough money in your emergency fund, or urgently need some money, getting a credit card cash advance may sound reasonable. However, you need to think twice and withdraw only the amount you really need.
There are several ways to obtain such an advance: you may either take out money at the nearest ATM, in person, or through convenience checks. Keep in mind that you may withdraw only a certain amount at the ATM so if you need a large sum you may want to try the last two options.
Borrowers can obtain a cash advance at the local bank using their credit card. Also, some cards come with convenience checks that can be written to yourself and cashed later.
How to Avoid Cash Advance Credit Card
If you want to avoid receiving a cash advance or the fees with your credit card are too high, you may choose to:
- Build an emergency fund. This is a great way to have additional finances when you suddenly need them. It pays to have a solid emergency fund and feel more relaxed when the next financial disruption hits you. You will be able to cover any unpredicted expenses from your own pocket without taking out any lending solutions.
- Use your credit card instead. The interest rates and fees for using credit cards are definitely lower than transaction fees for getting a cash advance on them. So, try to purchase items with your card instead and you will limit interest rates.
- Check your available credit balance. Another useful method is to monitor your account balance so that you avoid unpleasant surprises. You may set up online notifications and email alerts to know when your credit card balance suddenly drops below an established amount.
- Stop spending spree. If you avoid making unnecessary purchases and wasting your funds you will accumulate more money and save it. Ask yourself if you really need a new item, device, or furniture. It may be worth saving a few months and paying for it without a credit card.
A cash advance means a short-term lending option when you withdraw some funds using your credit card. This advance usually comes with certain transaction fees and interest rates.
You may obtain a cash advance from the nearest ATM if you decide to withdraw some money. Also, you may visit the local bank and obtain the necessary amount there using your credit card. Some credit cards also have an additional option of writing convenience checks.
You should decide which sum you urgently need to take out to cover your current monetary needs. Then you can either go to the bank and obtain the funds in person or go to any ATM and withdraw the funds yourself.
If you don’t know the PIN you may request it at the lending institution where you’ve got your credit card. Keep in mind that it may take some time. Otherwise, you may request a cash advance in person at the banking institution.
You should pay the debt off on time – usually by the end of the repayment period. The funds should be returned together with the interest rate that has accumulated and any extra charges if applicable.
This is a fee that a borrower should pay for credit utilization. This fee differs among credit card providers so you should check this information before you apply.
If you want to avoid getting a cash advance on your card you may use alternative solutions. One of the ways is to ask your family and friends to lend you some cash. Also, you may use the funds from your emergency fund without taking out any loans or extra debt.