In times of financial emergencies and dilemma, most people turn to cash advances from their credit card for an instant money-fix. Although it’s the perfect solution for your problem, it also comes with a number of risks that can put you into a downward spiral.
So before taking the first step in getting an advance off your credit card, read the following the dangers to save yourself from further financial trouble.
Of course, there’s always a price to pay for the convenience of being able to get instant cash. First, you need to pay a convenience fee depending on your credit card provider. For some companies, you need to pay a percentage of your transaction and for some, a flat dollar amount. Aside from the convenience fee, you might also need to pay an ATM fee if you withdraw cash directly from the machine. Adding these fees to your cash advance makes it really costly.
Now, this is the most dangerous one. Interests for Cash Advances are much higher, sometimes by 5-8%, than regular purchases made through your credit card. So if you are paying 16% on your credit card purchases, you will be paying up to 24% for your cash advance. That’s too much for borrowing money!
No Grace Period
Unlike credit card transactions, the interest rates are charged immediately. For regular credit card purchases, you have a month to pay back the money without the interest rate, while cash advance interest starts as soon as the transaction is processed.
Bad Financial Habits
This can definitely encourage and facilitate bad financial habits because you tend to depend on the instant solution that Cash Advances can give. Instead of becoming wise on your purchases and budgeting your money well, you just rely on the idea that you can get a cash advance anytime you need it, not caring about the risks and consequences.
Now that you already know the dangers of Cash Advances, it’s better to think 100 times and look for other better options first before turning to this method.