When it comes to a short-term loan, there are several different options. One is a cash advance, which can be a good solution for some people who need a quick influx of funds.
However, cash advances can be expensive. They have high upfront fees and interest rates, and they can also hurt your credit score.
What is a Cash Advance?
A cash advance is a form of short-term financing that can help you get cash in an emergency. It works similarly to a credit card purchase, but cash advances have higher interest rates and fees than purchases.
While cash advances can be an effective way to cover a one-time expense, they may be too costly for long-term use. They also can impact your credit utilization ratio, which is a key factor in determining your credit score.
Most credit card issuers make a small percentage of your overall revolving credit line available for cash advances. This amount is usually printed on your monthly statement or visible online.
When you take a cash advance, interest begins accruing immediately, so you’ll need to pay it off quickly or face paying high fees. This type of debt can also hurt your credit score if it pushes your credit utilization ratio above 30%, which can make it more difficult to keep up with your payments.
Do I Need a Cash Advance?
A cash advance on your credit card is a convenient way to get money quickly. However, you should only take out a cash advance if you have no other alternatives available to you and are truly in a financial emergency.
If you do need a cash advance, you should make sure to pay it off as soon as possible. This will help to lower the amount of interest you’ll pay in the long run.
You should also try to dip into your emergency fund before using a cash advance, so you don’t need to use a credit card to cover an unexpected expense. That way, you can pay the minimum due on your credit card and direct any excess funds towards paying down the more expensive balances with higher interest rates.
Alternatively, you can consider borrowing from friends and family, or joining a lending circle. These types of loans typically have much lower interest rates than credit cards, and you don’t have to worry about your credit score.
How Can I Get a Cash Advance?
A cash advance is a form of credit that allows you to borrow money from your credit card. It’s a quick and easy way to get cash, but it also has some downsides that you should consider before taking out a cash advance.
The first downside to a cash advance is that it can be expensive. Banks typically charge a one-time fee and a higher interest rate for cash advances. The APR for a cash advance is often more than the APR for a credit card purchase or balance transfer.
To avoid these inflated interest costs, you can build a rainy day fund in your savings account. Or, you can ask friends or family for a loan to cover an emergency.
You can also use your credit card to access a cash advance at an ATM or in person at a bank teller window. Some credit cards come with convenience checks, which allow you to write a check for the amount of the cash advance and then deposit it into your bank account.
Which is Better for Me?
The short answer is that a cash advance and/or payday loan is not for the faint of heart, let alone the wallet. Luckily, there are numerous alternatives to your local payday loan shop in the form of online lenders and peer-to-peer lending aficionados. The big question is, which is the right one for you? The answer to that question is a matter of individual preference, but the best way to answer it is by educating yourself about the options in your area.
