Credit Card Cash Advance: What You Need to Know

Sometimes you have no choice but to take out a credit card cash advance. The rent is due, the car breaks down, or you have an unexpected medical expense that comes up at the worst time possible. Emergencies happen that the worst times, that’s why they’re called emergencies. Though this is not always the ideal way to spend your money, here’s what you need to know if you choose to go that route. Don’t get too stressed out, by reviewing your other options, you may find that credit card cash advance is your best and lowest risk option.

Credit Card Cash Advance

[Read: Alternate Ways to Consolidate Your Loans]

Credit card cash advance v.s Payday Lending

  • Most credit card companies have a high interest rate on cash advances, and the interest begins to accrue the moment you borrow the money.
  • Payday lenders will loan you the cash quickly and with no credit check, but it comes at a high price.
  • Most lenders will charge a fee of around $15 per $100 borrowed, the trouble there is that if you are unable to pay this back, it can send you into spiraling debt.
  • Many people find themselves dug into a hole they cant get out of when unable to meet payments to payday lenders.
  • Most credit card companies will allow you to make payments on the interest accrued from credit card cash advances which means you can chip away at the interest with out racking up charges you can’t seem to make a dent in.
  • In the long run, the interest rate on cash advances can seem daunting but tend to cost a borrower less in the grand scheme of things than payday lending.

Life is going to happen; often times things we least expect pop up at the most inopportune times. The best thing you can do for yourself is plan for these unexpected moments. By doing your best to set yourself with a cushion or emergency fund you can avoid the scenario of credit card cash advances all together. Consider the following tips to keeping yourself from borrowing more than you want to:

Start building an emergency fund!

  • If you don’t have much expendable income at the end of each month still start somewhere.
  • Consider cutting out your morning coffee run and brew it at home, if you were to set aside the $3 a day you would be spending on coffee that adds up to $21 a week, $84 a month, $1,008 a year!
  • Put your spare change in a jar, it doesn’t seem like much but you’d be surprised how quickly you can add up $50 in change. It’ll be worth it when you need it the most!
  • Opt to have friends over for a glass of wine instead of heading to happy hour. You’d be surprised how much you can save from having a drink at home instead of at your local bar.
  • By taking these small steps to save, you don’t have to sacrifice much and can still yield high savings without feeling like you even had to try.
  • Every little bit counts, but if you really want to be on top of your game, you should have a savings with at least 6 months of your living expenses set aside to avoid falling into debt when unexpected circumstances arise.

Build your credit score

  • Open up a credit card and put some purchases on there that you have the available funds to pay off.
  • Using 30% maximum of your credit limit and making payments that are higher than the required minimum is one of the best ways you can build a strong credit score.
  • Having a good line of credit is a sure way to keep yourself out of financial peril.
  • Banks and other lenders are much more willing to loan you money and at a reasonably interest rate if you’ve proven to be a reliable borrower.

Establish a line of credit with your local credit union

[Read: Needing Extra Cash for the Holidays]

Ideally, you never want to find yourself in a situation where you are scrambling for money. But as we all know, life happens when you’re busy with other things and its not uncommon to find yourself in a pinch. Following these practices can help you avoid taking out credit card cash advances and can lower your overall daily level of stress. For further financial advice on borrowing money, visit the link below for an informative video to increase your knowledge.