The Dangers of Cash Advances on Credit Cards
There are many occasions where a person may wish or need to have some extra money quickly. Although many options exist for people seeking additional cash, many people choose to take out cash advances via their credit card. Before you choose to utilize this option, it is important for you to be aware of all the potential consequences that arise from doing this. The temptation of taking this quick option leaves many people with unexpected financial difficulty later, such as dealing with debt settlements, and you should know how the problems happen.
What is a Cash Advance
Many people take out cash advances without even fully understanding what this service entails. As with any financial transaction, failing to know what you are agreeing to can be dangerous and leave you with surprising results. Making sure that you have a better understanding of what you would be doing in taking this kind of loan will help keep you protected from unforeseen effects.
A cash advance allows a credit card holder to borrow money against their credit limit. The amount borrowed is often capped at some percentage of a person's credit limit. This money will typically incur both a fee as well as interest to be re-payed along with the balance of the advance. These cash advances can be done at ATM's or in person at banks and other places that make such loans.
Problems from Advances
While taking out a cash advance may seem like a good idea, there are many potential difficulties that can come from taking this step. Often, many people fail to be aware of what impacts this process will have beyond the initial receipt of cash. Prior to you engaging in this practice, be sure that you know these potential pitfalls.
One of the problems that people face from their cash advances is the interest rate at which they have to repay the money. On top of the actual amount received, many credit card companies attach a higher rate of interest onto these transactions than they do on general purchases made with a card. Additionally, the interest on these will often begin to accumulate immediately rather than being subject to any grace period from the company. The result of this is that people find themselves owing far more on a cash advance than they would from making any other purchase with their credit card.
Another disadvantage of a cash advance comes from the transaction fee that a person is charged. This will be a set percentage of the advance taken, and will take effect immediately. This fee only adds to the total cost associated with repaying the money a person takes out via their credit card.
Although a cash advance can seem like a good idea to some initially, the dangers of cash advances on credit cards make this an unwise practice. While obtaining cash through a credit card is an option available to those seeking money, the cumulative impact of this practice will negatively impact the cardholder. By charging higher interest rates for this service and eliminating any grace periods, credit card companies will wind up billing you far more for this transaction than they do for any type of purchase you would normally make. The additional impact of a transaction fee on top of the advance that takes place instantly only adds to the price of making this decision. Ultimately, taking out a cash advance is an extremely risky move, and you should remain very wary of engaging in any transaction of this nature.
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State Guides to Credit Card Laws
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