Cash Advance

What is a Cash Advance?

A cash advance is a short-term loan which you can take from your credit card. When you use your credit card to borrow the money, you agree to the interest rate and other fees. Creditors generally charge high interest on cash advance. However, they are still preferred by the borrowers because it is a quick way of receiving funds.

A credit card cash advance may not directly hamper your Credit Score, but it may indirectly affect by lifting your outstanding balance and your credit utilization ratio, which are important deciding factors in credit scores.

There are also some other types of cash advance, such as merchant cash advances, payday loans, etc.

How does Cash Advance work?

You can get a cash advance in various ways as mentioned below:

• ATM - If you have a PIN for your credit card, then you can insert your card in the ATM machine and enter the PIN, you will receive cash. Note that, most of the ATMs have a limit for amount and transactions.

• Check - A majority of credit cards provide convenience checks that make the process easy to get a cash advance. You can fill a convenience check the same way you do a regular check. Subsequently, you can withdraw this way at the ATM.

• In-Person - Visit your Bank or credit union and ask for a cash advance with your credit card. Your bank will charge you a fee for the advance, in addition, separate fees and interest will be charged.

Why are Cash Advances Expensive?

Cash advances are expensive because they charge on your credit card with interest. When you buy something with your card and payback before the due date, then you don’t owe any interest. But, in cash advance, you promptly owe interest with fees.

Is Cash Advance Bad?

A cash advance can be helpful during an emergency when you don’t have enough savings. Although you should take this decision cautiously because it backs with high-interest rates.