Smart Ways to Use a Credit Card Cash Advance

Smart Ways to Use a Credit Card Cash Advance

While one of the least favorable ways to get your hands on money quickly, credit card cash advances, when used wisely, can sometimes save the day.

The key phrase in that last sentence is when used wisely.

After all, this strategy can be hugely expensive and ruin your credit altogether in extreme cases. With those caveats in mind, let’s take a look at some smart ways to use a cash advance.

Understand What You’re Buying Into

Before charging off to an ATM with your PIN, take a look at your credit card agreement and gain some clarity about the terms to which you’re about to agree.

That cash advance is going to come at a high interest rate. It’s going to have fees attached and you’ll also pay an ATM fee to get it. The sooner you pay it off, the less expensive the loan will be.

Look for the cash advance fees and what the interest rate on the loan will be. Figure out how much time you’ll have (if any) to repay the advance before interest charges will be applied.

Get Clear About Your Limit

In most cases, credit card issuers are willing to extend you more credit towards purchases than cash. The truth of the matter is they don’t really want to hand you money, which is why they make it so expensive to borrow it from them.

It’s also why advances come with more stringent terms attached.

With that said, going over your credit limit with a cash advance can be very expensive and will have a highly detrimental effect on your credit score. So, before you take that cash advance, find the boundary lines and make sure you stay inside of them.

Think Conservative

Having a card with a great credit limit and a correspondingly high cash advance amount can be a temptation. However, you should be careful to get only as much cash as you’ll need to solve your problem, so you can then repay it as quickly as possible. The more you take, the more difficult it will be to repay.

With that said, assess the situation carefully before you request the advance so you can be sure you get enough to cover the need on the first pass. You’ll incur additional fees each time you go back for more.

Depending on the nature of the problem you’re trying to solve, working with an organization like Freedom Debt Relief to restructure your obligations might be a better strategy to pursue than taking a credit card cash advance.

Don’t Use the Card Until the Advance Is Repaid

Balances with the highest interest rates are serviced first when you make a credit card payment. If all you have is the advance on the card, every dollar will go towards eradicating that debt.

When you add purchases, payments on those transactions will be deferred until the advance is paid off. As a result, they will accrue more interest in the interim, making the items you acquired far more costly.

Consider These Alternatives

Taking a credit card cash advance should be one of your last options for getting money quickly. It’s expensive, fraught with peril and tricky to repay. The financial experts at The Balance recommend trying the following tactics first:

• Small loan from your bank or credit union
• Small loan from a family member or friend
• Payday advance from your employer
• Due date extension from your creditors
• Consumer credit counseling
• Local emergency hardship programs (typically offered by your local human resource department)

Failing those, following these tips regarding the smart ways to use a credit card cash advance will at least make it a less expensive proposition.