What You Should Know Before You Take a Credit Card Cash Advance

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Running a little short of cash this week? Then you remember that you can go to the ATM and get cash with your credit card, but do you know just how much that cash is really going to cost you in the end?

1. Cash advances usually have a transaction fee that can be between 2 and 4 percent of the total amount advanced.

2. There is no grace period with cash advances. The interest meter begins ticking the moment that cash hits your hand.

3. The interest rate on cash advances is normally about 10 percent higher than the interest rate on purchases. I have never seen a cash advance interest rate that is less than 20 percent and most of them are higher than that.

4. Almost all credit card companies will apply your payment to the transaction with the lowest interest rate first. This means that your cash advance will be the last transaction to be paid off.

These costs are no secret. Your credit card issuer is required by law to disclose them.
Remember that little tri-fold piece of paper that comes with your credit card. The one that most of us don’t bother to read. Well, that is card member agreement and that is where the above facts can be found.

The best advice I can give about a cash advance is to put it on a card with no balance and to pay it off as soon as possible. Before you take out a cash advance, you need to give it a second thought and decide if it is really necessary. If you are using cash advances to pay bills or buy necessities, it is time to make an appointment with a debt counselor.