Cash Advance


A cash advance is a short-term borrowing option that you can avail from the bank through your credit card. Banks usually allow credit card holders to use up a portion of their credit limit for immediate cash needs. You can withdraw this portion of your credit limit directly over-the-counter or through an ATM machine.

Though a credit card cash advance looks like a typical ATM withdrawal, it is actually a loan with its share of interest rates and finance charges. It also comes with other fees that usual credit card purchases are not subjected to.

Advantages Of Cash Advance

Here are some of the reasons why you would want to opt for a cash advance:

  • Quick access to needed funds. A cash advance is ideal if you have emergency cash needs and have no time to wait for usual loan application processes. All you have to do is utilize the available balance on your credit card.
  • No need for paperwork or approval from the bank. Because you are using a credit card that you already qualified for previously, there is no further need for bank approval when getting a cash advance.

Disadvantages Of Cash Advance

  • Higher APR (Annual Percentage Rate). The interest you will pay on a cash advance is usually higher than what you’d pay on ordinary credit card purchases. It is not unusual for a cash advance to have an APR or 25% or higher.
  • Cash Advance Fees. On top of high interest rates, you will also be charged cash advance fees ranging from 3% to 5% of the entire transaction.
  • Faster accrual of interest. While typical credit card purchases accrue finance charges depending on your payment due dates, cash advances start accruing interest on the day of your transaction.

Who Should Avail of Cash Advances?

You can avail a credit card cash advance if you’re waiting for delayed funds to arrive and need cash for immediate spending. As soon as your expected funds arrive, you can pay off the cash advance within days to avoid further interest charges.

If you are traveling in a foreign country and can’t use your card for store purchases, you can find universal ATM machines where you can initiate a cash advance from your card.

What To Consider For Taking This Kind Of Loan

Before getting a cash advance, check with your bank about the rates, fees, and repayment terms. Make sure you are well informed about the pros and cons, and have a clear plan on how to repay the debt.

It may sound counterintuitive but using a cash advance should be one of your last options when you are in desperate need for money. The rates and fees you would pay on the cash advance would make repayment a bit difficult.

If you are truly strapped for cash and have bad credit, try other borrowing options first with lower interest rates. You can try borrowing from family and friends, or secure a loan from a credit union.

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