June 27, 2016
At some point in our lives, we may be in need of immediate financial assistance. It could be a lucrative business opportunity, a medical emergency or recurring bills you have difficulty paying at that moment. You may think getting a cash advance is a way out for your financial issues and in many situations, it actually is. However, it’s really important to know when a cash advance is not a good option and when you shouldn’t get one. Having more information helps you make better choices. Let’s look at some examples in which a cash advance may not be the best solution.
Cash advance is a service provided by many credit card institutions which allow cardholders to withdraw an amount of cash up to a certain limit through an ATM, a bank, or some other financial agencies. Cash advances usually have high-interest rates, could be even higher than the credit card itself and the interest starts to increase in amount immediately after the money is borrowed. However, cash advances are fast and easy to obtain.
The amount of the borrowed money depends on the credit score, the business, and its credit card sales. It’s safe to say that cash advances should be used as a last resort option. That doesn’t stop many businesses with bad credit from using cash advances to finance their activities.
Interest charges vary from one lender to another, but the rate is usually 5 – 6 percent higher than the bank’s standard interest rate. The average interest rate on cash advances is 25 percent but charges vary widely – from 10 to 36 percent. The interest charges depend on the number of days the interest has accrued.
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 credit card companies cut back on their client’s cash advance limit, so many people have a separate cash advance limit that is lower (usually half) than their regular credit limit. Some credit card companies can raise their cardholder’s interest rate to help offset the increased risk.
If you’re about to get a cash advance, it’s good to look for alternatives first. There are different alternatives for cash advances, but probably the best one is to ask your parents or family for a small loan first. You may also have is to use cash in your Roth IRA. There are other alternatives for credit card cash advances such as a collateral or secured loan, salary advance from your company or a consumer loan from your local bank or credit union.
July 5, 2016