When financial difficulties are an issue, many people turn to a credit card cash advance or write out a credit card cheque to help make it through to pay day. The problem is that credit card cash advances charge an even higher APR than normal credit card debt. Does a credit card cash advance help someone to make it to their next wage or is it a source of long term personal debt?
What is a Credit Card Cash Advance?
A credit card cash advance is an opportunity for someone to borrow money against their permitted credit limit. A credit card cash advance doesn't simply extend to withdrawing money from a cash point machine, it can also be a credit card cheque or a gambling transaction.
Advantages of Credit Card Cash Advances
- Short term financial difficulties. A credit card cash advance helps people that are struggling with financial difficulties. It becomes possible to make essential payments, such as buying food and paying the rent;
- Convenience. Applying for a loan or overdraft increase can take time. However, a credit card cash advance simply involves going to a cash point machine or writing out a credit card cheque;
- Emergency situations. There may be nowhere that will take a credit card once it gets late. A credit card cash advance may help cover an emergency situation, like being able to afford a taxi home when there are no other sources of public transportation available;
- Bad credit. Having adverse credit means that other sources of credit may not be available to a borrower. Those with an existing credit card can get an advance. Although it is a high APR, the interest rate is still considerably less than many bad credit bank loans or payday loans.
Disadvantages of Credit Card Cash Advances
- High APR. Getting a cash advance results in the borrower being charged a higher rate of APR than credit card debt. To make matters worse, subsequent repayments pay off the low APR credit card debt before the high APR debt;
- Additional fees. Most card providers not only charge a high APR on credit card cash advances, but they also impose a further fixed fee for the transaction itself;
- Too easy. Getting a credit card cash advance can become a little too easy. There is a tendency to turn to a credit card cash advance or write out a credit card cheque each time a person struggles with financial difficulties. This can accrue a lot of high APR interest, not to mention additional fees;
- Personal debt. After getting a cash advance or using a credit card cheque, a large number of borrowers only make the minimum monthly payment. This serves to exacerbate personal debt problems, particularly for those that seek a credit card cash advance the next month.
A credit card cash advance may offer a lower APR than a payday loan, but it should still only be used in an emergency or by those that have a bad credit rating. People with good credit should seek to get a short term extension to their bank overdraft.
Those that found this article helpful may be interested in finding ways to reduce household bills, eliminating credit card debt and reduce living costs.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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