There are various instances in life when you face a shortage of money and then you start looking for various options for immediate financial assistance. Some of the major issues with lack of money can be due to an optimistic business opportunity, some medical emergency or unable to pay recurring bills on time. Well, in that case, You may go for getting an advance money to save you from your financial issues.
You should always know when a cash advance is not a good option and when it is not the right time to get it. The following examples will help you in making the best choice.
What is a Cash Advance?
Various credit card companies give cash advance that you can withdraw fixed cash through an ATM, a bank, or any of the financial agencies.
Advance money can cost you in terms of the interest rate as they are usually higher than the credit card moreover, the interest starts to grow immediately after borrowing the money.
The cash lend will always depend on the credit score, the business, and its credit card sales. Always ensure that cash advances should be used as a last resort option.
Reasons Why You Should Avoid Cash Advances
Higher interest rates
The Interest rate is usually 5 – 6 percent above the bank’s standard interest rate. Thought The average interest rate on cash advances is 25% but it might not be the same for all the lenders. – from 10 to 36 percent. It also relies on the number of days the interest has accrued.
Cash Advances may Trigger Higher Credit Card Interest Rates
High credit card interest rates
Credit card companies tend to pay attention to borrowers of cash advances and some appear to see frequent use of them as a potential sign of financial issues. Some of the credit card companies restrict the amount of cash advance. On the other hand, Some credit card companies increase their interest rate to lower chances of their risk.
- No Grace Period – Usually, you have a month’s time as a grace period with the standard credit card purchases to repay the borrowed cash.interest-free. However, many cash advances don’t provide a grace period and interest will start to increase immediately after you take a loan. Often installment loans can give you more breathing space
- Fee for the Upfront Cash Advance – When you get advance money using your credit card, you may be asked to pay an upfront cash advance fee. The calculation of the fee depends on your credit card provider.
Never ignore the other options, If you’re about to get a cash advance. Of course, There are various options for money advances, but it is best to ask your closest ones for a small loan first.