Avoiding the Expensive Way to Use Credit Cards
A cash advance is basically a service offered by all major credit card and charge card companies. The service allows cardholders to draw money, either via an ATM or on the internet, up to a specified amount; the maximum amount is however limited by the credit limit of the card. When you apply for one, you should know what kind of cash advance services do your own bank offer? The kind of cash advance services that your own bank offers may vary according to the actual institution it serves.
A lot of people do use cash advances and many others have actually benefited from them. This form of borrowing is usually used in cases where there is an emergency, and as such, they are an expensive way of getting quick cash. They can however be a very convenient and smart way of doing things. There are a few reasons why people prefer to take cash advances over credit cards.
For instance, most people cannot easily get access to short-term loans. A lot of the time, this can be because they do not qualify for the same amount of money, or because they do not have enough in their bank account. This means that they will need to take out a cash advance credit card. On the other hand, many people have no choice but to take out short-term loans from payday lenders. A cash advance can therefore help them to deal with the short-term money crunch while also getting access to better deals on payday loans.
Cash advances also tend to have low interest rates, compared to other credit cards and short-term loans. This is mainly because the money you are borrowing is extended using your credit score. As such, when you borrow cash advances, you are effectively taking out a new line of credit. The interest rate therefore tends to be relatively low.
On the flip side, there is also the potential for abuse of the system. There are many cases where people take out cash advances even though they do not have enough in their accounts. They then add to their accounts with the help of a debit card. However, this is not allowed by the bank and as such, the bank will charge a hefty interest rate for the privilege. Some banks will not allow debit card transactions at all, whereas others will charge exorbitant fees. In these instances, the payday loan lender is your best bet.
It will also be best avoided taking out regular APR financing to pay off cash advances. When you do so, you will find that the repayments start to add up and take a lot of time. If you need to make a small repayment, it will not take long before the total is so high that you could not possibly afford to repay it. In this case, the payday loan lender will offer a better deal.
One other expensive way to use a credit card is to withdraw cash advances. If you have a debit card, you can easily take out money from the ATM. However, there is always a fee for doing so and it tends to be quite expensive. When you take out cash advances, the ATM surcharges may be quite high and this will tend to add up to the total amount you have to pay.
The key here is to only take out cash advance loans when you actually need the money. If you keep the balance of the card in your possession, you will never be able to draw against it. This will allow you to use it only for emergencies and thus, keep the balance as low as possible. It will also allow you to keep the interest rates low on these kinds of credit cards.