If you need cash fast, a credit card cash advance can be a helpful option. But how do credit card cash advances work? Read on to find out.
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What is a credit card cash advance?
A credit card cash advance is a short-term loan that you can take out using your credit card. The amount you can borrow will be limited by your credit limit, and you’ll typically have to pay high interest rates and fees.
Credit card cash advances can be helpful in a pinch, but they’re not a good long-term solution. If you need money, it’s better to explore other options, such as personal loans orBalance Transfer Cards.
Here’s what you need to know about credit card cash advances, including how they work, how much they cost, and alternatives to consider.
How do credit card cash advances work?
A credit card cash advance is a service provided by most credit card issuers. It allows cardholders to withdraw cash, either through an ATM or over the counter at a bank or other financial institution, up to a certain limit.
There are usually fees associated with credit card cash advances, including a higher interest rate than for purchases, and sometimes a flat fee. Cardholders should also be aware that cash advances generally do not count towards any rewards programs offered by the issuer.
If you are considering a credit card cash advance, it is important to understand how the process works and what fees you may be charged. You should also have a plan for repaying the money you borrow, as the interest charges can add up quickly.
How to get a credit card cash advance
There are a few ways to get a credit card cash advance, but all will require you to pay certain fees and interest charges.
You can get a credit card cash advance by using your credit card at an ATM or by going to a bank or credit union and asking for a cash advance over the counter.
If you use your credit card at an ATM, you will likely be charged a fee of around 3% of the total amount you withdraw, and your credit card provider will likely also charge you interest on the cash advance from the date of withdrawal.
If you go to a bank or credit union to get a cash advance, you will likely be charged a fee of around 5% of the total amount you withdraw, and your credit card provider will likely also charge you interest on the cash advance from the date of withdrawal.
What are the fees and interest rates for credit card cash advances?
Most credit cards will charge a fee for taking a cash advance, as well as interest from the moment you take the advance. The fee is usually a percentage of the total advance, or a minimum fee, whichever is greater. For example, your card’s terms might state that the fee for cash advances is either $10 or 5%, whichever is greater. So if you took a $100 cash advance, you’d owe $105 total ($100 plus the $5 fee).
The interest rate for cash advances is often higher than the interest rate for purchases. And, it begins accruing immediately—there’s no grace period like there is for purchases. For these reasons, it’s best to avoid taking cash advances if at all possible.
Credit card companies may also limit how much you can withdraw as a cash advance. If your credit limit is $5,000, you may only be able to withdraw $500 as a cash advance.
How to repay a credit card cash advance
If you’re repaying a credit card cash advance, you have a few options. You can make a minimum payment, which will cover interest and fees but not the principal amount you borrowed. Or, you can pay the full amount of the cash advance plus interest and fees. You can also make additional payments toward the principal amount you borrowed.
What to do if you can’t repay a credit card cash advance
If you can’t repay a credit card cash advance, you may be able to negotiate with your lender. You may be able to work out a repayment plan or an extended period of time to repay the debt. You may also be able to have the fees and interest waived or reduced.