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Credit Card Cash Advance Definition and How It Works

cash advance on a credit card

All is fair in love and war. Yet, the financial side is no exception, too. In times where you are looking for 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 get a cash advance from a 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

Even though credit cards are accepted in large establishments in almost all countries, you still might need cash. In such a case, a credit card cash advance works as a good 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, what is a cash advance on a credit card? At its most basic, it means taking out a small but very expensive loan from your credit card. In other words, 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 on a credit card, it makes sense to learn how it works.

Think of it as a small personal loan that doesn’t require filling out a separate application to get money. 

You simply head to the ATM or bank to get your funds. You only withdraw the amount up to your card’s cash advance limit. To add, no need to pass a credit check when you need money immediately. 

Unlike the money withdrawal from a debit card, the money you take out from a credit card 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 cash. 

But there are some differences – the amount you can borrow, how you can repay it, and the cost of borrowing. Before you even consider a credit card cash advance, make sure you meet the cash advance requirements. It always makes sense to check your cardholder agreement first. 

What Is a Cash Advance Fee?

The reason why this financial option is rarely recommended is high cash advance fees. 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.

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. 

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 for credit card cash advances may be as high as 25 percent. And here is why. 

When you buy something with your 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 issuer back, a bank has the ability to repossess the item.

With a cash advance, taking back the money a bank gave you is impossible. As a result, a bank stands more to lose and increases the rate on cash advance to make up the difference in bank profits. 

Cash Advance Limit

It depends. Well, a bank understands credit card cash advance as a possible sign you’re in financial trouble. It understands it takes a risk. Generally, your credit card cash advance 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 cash advance limit is about 20 percent of the total credit card limit. 

How to Get Cash from a Credit Card without Cash Advance?

In times where unexpected emergencies make your head spinning, 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 get cash from a credit card without cash advance? Know your options.

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. 

Cash Advance on a Debit Card

A debit card cash advance is a great option for those who need cash fast. But it works a little differently. 

To get a cash advance with a prepaid debit 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 ATM, there’s a daily limit on how much you can withdraw. Usually, it’s somewhat between $300 to $500. In case, you need to take out thousands, debit card advance is the solution. 

Also, you are not limited to your bank only. There are a lot of other financial institutions that offer debit card 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 also another way out. You need to go to your bank teller and request a cash advance. To verify your data, take your driver’s license or passport. As such, if you have trouble memorizing that four-digit number, this is the only way to get a credit card cash advance. 

Anyway, whether or not you are using a PIN, think twice before taking out cash advances. High interest rates and no grace periods should be your first red flags. Depending on your needs, you may have other choices that make more sense.

How to Minimize Credit Card Cash Advance Fees

There are several ways to lower the cash advance charges on your credit card. You need to:

Some fees are a flat rate or a mix of a percentage of the transaction and a flat rate. 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.

If transaction fees for your credit card present only the second option you may decrease them by withdrawing only the amount of cash you urgently need.

The interest on your cash advance transaction starts to accumulate the day you withdraw the funds whereas common credit card purchases 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.

The key to having lower rates is to find the most affordable credit card. Search for lower cash advance fees and better rates if you plan to withdraw funds and take out a cash advance once in a while.

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 cash in your emergency fund, or urgently need some cash, 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 cash 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 getting a cash advance or the fees with your credit card are too high, you may choose to:

FAQs

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 cash. 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 utilizing cash on the credit card. 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.

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