Disadvantages of Cash Advances
Credit cards come with a lot of added features these days. Not only can you get numerous types of rewards, better options, and more fraud security, but plenty of credit cards offer you cash advances that you can use for anything you like. Not as though you couldn’t use your credit card, but sometimes having cash can be handier.
Cash advances come with a lot of problems though. Most of these problems are unknown by the everyday consumer, and if they are not willing to take the time to find out themselves, the credit card company certainly is not going to inform them. After all, it is right there in the fine print. This cash is actually just your credit in cash form. You still have to pay it back just like you would if you had used your credit card, except for the fact that getting a cash advance makes you more susceptible to things you normally would not have to deal with if you had simply used your credit card or your own cash.
For a moment, let us say your interest rate is currently at 10%. This is only for normal credit card use. However, in the fine print it states that cash advances will have an interest rate of 23%. It is not uncommon practice for a cash advance to have a larger interest rate than what you are typically used to. If you pay your balance off each billing cycle, you have little to worry about. The problem is that there are a lot of people who do carry a balance, at the end of which will be tacked the cash advance. Similar to balance transfer methods, your payments will go first to the regular purchases made with your card before ever reaching the cash advance, thus allowing it maximum time to rack up a lot of interest.
Cash advances bring in plenty of extra money to credit card companies through the fees imposed. These fees will vary from card to card or company to company, but there will almost always be at least some kind of fee. A popular fee is the flat fee, which is basically a fee for the service of the cash advance. Some cards allow you the use of an ATM for your cash advance, but there is also a fee associated with ATM use.
You might have gotten an offer in the mail recently with a page made up of what appear to be checks. These checks are often treated the same as cash advances; plenty of fees, different interest rates that are usually higher than yours (they are often between 20 and 25%), and the amount you write out will be added behind the balance you carry, giving it time to accrue plenty of interest.
Cash advances, even if they seem appealing, are quite unnecessary. They can sometimes turn into a vicious cycle for some consumers which can turn into a failing credit report. If you use your card and give it the responsible attention it should have, then there is no need for you to even bother with a cash advance. After all, even if your credit card has a limit of $2,000, what do you need a cash advance for if you have that much at your disposal?