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If you own a credit card, you may be eligible for a cash advance. However, it’s important to understand what a cash advance is, how they work and how much they cost so you can make a more informed decision about whether a cash advance is right for you.
Think of a credit card cash advance as a type of loan. It typically involves you borrowing actual cash from a credit card company. However, the amount of money you’re able to receive is determined by your cash advance credit limit. This is often lower than the credit limit you have for making purchases with your credit card directly, and typically allows you a few hundred dollars. You can find out what your limits are online by signing in to your account or simply looking at one of your credit card statements.
Cash advances are expensive. They usually feature high interest rates compared to your interest rate for normal purchases. Another important difference is that there is no grace period associated with a cash advance, which means that interest immediately starts building on your cash advance.
You will also have to pay a cash advance charge, which will either be a flat rate or a percentage of the amount you withdrew. This percentage is typically in the range of 2 to 5 percent, which is why you’ll want to pay it back as soon as you can. Be sure to check your credit card terms to determine exactly how much a cash advance will cost you.
You can take out your cash advance from an ATM or receive an actual check from your credit card company. Remember, an ATM will charge you a withdrawal fee as well.
For the most part, you never want to obtain a cash advance. In fact, many financial experts recommend you to stay far away. That’s why cash advances should only be used if you’re facing an extreme emergency, and need actual cash quickly, such as situations where your car breaks down or your rent is overdue. While a cash advance is often cheaper than a payday loan, you should still take a critical look at your finances if you’re in a situation where you feel you have to use one.
Ultimately, you should carefully weigh the costs and benefits when deciding on a cash advance. If you do decide to take out a cash advance, always remember to pay the money back as soon as possible or the interest will add up quickly.
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