Cash Advances Explained - What They Are and When to Use Them

Cash Advances are a simple and easy way to borrow cash using only your credit card. However, they come with some stipulations you should know before using them.

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Cash Advances – What You Should Know

The convenience of debit and credit cards has caused the need for cash to dwindle. People often don’t even carry cash in their wallets anymore. However, there are times when the need for cash arises and credit card companies are there to fill the need, with cash advances.

How To Get A Cash Advance

So, what exactly is a cash advance? Well, often times, when an issuer, such as a bank, offers a credit card, they include the ability to withdraw cash using the credit balance on the card. This is called a cash advance.

The user can withdraw the cash from an ATM or bank depending on the card. The amount of cash withdrawn is taken from the user’s credit balance. Basically, it is like a cash loan, but from your credit card itself. This cash advance will need to be paid off like any other purchase using a credit card.

This makes cash advances a useful option for those who need cash quickly. However, often times a cash advance comes with different terms than a usual credit card swipe.

Here’s where it gets tricky:

What Are Drawbacks? – Why You Might Not Use Cash Advances

While having the ability to withdraw cash from your credit card balance may seem convenient and practical at first, there are some drawbacks to using cash advances. First, most credit card companies charge extra fees and/or interest rates on the money withdrawn.

An example of this can be found with a card offered by Discover. The Pricing Schedule lists regular APR at 23.24%, but with a cash advance APR comes in at 25.4%. This is a 2% difference, which can easily begin to add up over time. Also noted in the pricing schedule is the fact that interest for cash advances is charged the first day of the billing period that the withdrawal is posted.

In essence, the credit card companies are charging you more for the convenience of a quick and easy cash loan. Therefore, a cash advance should be used when you need it rather than want it. This is why you should always be knowledgeable of the terms of your credit card user agreement.

Payday Loans – What They Are & How They Work

When looking for cash advances online, you may find many options listed that do not come from a credit card but from a loan company. These are called Payday loans, which are also often referred to as cash advances.

Payday loans are unsecured, short-term loans that have extremely high interest rates. These loans are usually expected to be paid back within the month, or on “payday”, hence where they derive their name.

Payday loans are a fairly new loan concept and have different regulations from state to state with some states banning them all together.

You should research your local laws and regulations before acquiring a payday loan. If you are interested in getting a payday loan, you can find some available right here on the site.

But what if these options aren’t for you?

Alternatives to Cash Advances

After looking at the terms and conditions of using a cash advance, you may feel it is best to use an alternative method for borrowing cash. Fortunately, there are a few options.

First, there is the option of a personal loan. Personal loans often require a credit check and collateral but usually have lower rates than cash advances or payday loans. Options for personal loans can be also be found right here on the site.

Another option, while not as opportune, is to simply save money until you have the funds necessary to do what you need or want. This can help you learn budget management and avoid debt in the process.

In conclusion, cash advances and payday loans are a helpful option if you are in need of a quick cash loan or require cash in a sudden manner, but should be used only when you are knowledgeable about the terms involved. You should always be smart when taking out debt and be sure to weigh all the consequences, both good and bad.

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