When you're in a financial bind, you may consider taking out a cash advance on your credit card. A cash advance is a way to access money without applying for a formal loan, and it doesn't require a credit check. It can provide funds immediately, but it's important to remember that the amount of fees and interest you pay is directly related to the duration of your repayment. Cash advances are intended to be a very short-term solution and they limit the maximum amount of cash you can access, so they may not be enough to cover large expenses.
Interest charges on a cash advance are different from those on a purchase. Not only is the rate usually higher for a cash advance, but there is no grace period, which means that interest starts to accrue from the date of the transaction. You'll pay interest on your cash advance even if you paid it in full and had a zero balance for that billing cycle. Since your advance starts accruing interest the same day you receive your cash, it's important to start repaying the amount you borrow as soon as possible.
To minimize the cost of a cash advance, make sure you have the necessary line of credit available on your credit card and plan to pay it off as soon as possible. In addition to the transaction fee, cash advances will accrue interest charges, as do regular purchases. It's also important to check your credit card terms to find out what your cash advance limit is and how much credit you have available for a cash advance. You can use Bankrate's credit card calculator to see the total cost of a cash advance and how different payment strategies can change the amount you'll have to pay.
Plus, if you're abroad and need quick access to cash, taking a cash advance with a credit card can save your life. If nothing else, strive to make more than your required minimum payment each month as you work to repay your cash advance. Your credit card statement should show you the different interest rates for your purchases, cash advances, and balance transfers. And remember that if you can use your credit cards to make a purchase instead of getting a cash advance, you may be able to limit interest and transaction fees.
