Applying for Credit Card, Forget about Cash Advances on It!
Is there a bad debt on your credit card and are you still in urgent need of "cold cash"? As it happens with most credit cardholders, their financial need leads them to the idea of credit card cash advances. But this practice only aggravates the situation. You should know it that there is hardly any credit card application that offers a grace period or small fees for cash advances.
There are certain pitfalls connected with cash advances that inevitably take you deeper in debt. So, you should avoid withdrawing cash from your plastic if debt relief is what you are trying to achieve.
Why don't creditors like to see you making cash advances? First, it shows you can't manage your credit card properly, second the advance implies you are in need of money and so - in financial trouble. It poses you as a high credit risk for the lenders and they protect themselves by charging you fees and sky-high interest rates.
If you are trapped by credit card debt and you are still thinking of cash advances to give you more available funds, be aware of the following pitfalls associated with the procedure:
- You are charged interest straight off you make a cash advance. Therefore, cash advances are not subject to a grace period. So, even if you pay the credit card bill in full and on time and are not charged any late fees, you will still be imposed a finance charge for any cash advance you made.
- Cash advance payments are applied to your account just after payments to purchases are applied. Thus, if you make a balance on your credit card, the cash advance payment may increase, together with other charges, such as late payment fees or higher interest. This is a very wise trick on the part of the credit card company to make more money of the cardholder.
- Another trick is that credit card checks touted by the creditors by the mail and posed as a convenient way to pay off the credit card bill are usually treated as cash advances and as a result entail corresponding fees and interest.
- Now, as to the size of the fees. Cash advance fees are varying and the amount charged depends on the calculation method. It's the calculation method that generally makes the fees exorbitant. Some credit card issuers charge you fees based on percentage, ranging typically from 1% to 4%. Others apply "flat fees" for cash advances which are always the same, irrespective of the cash advance amount.
- The bad thing is creditors tend to combine both the methods which results in higher fees. All in all the calculation methods can be rather complex and tricky, so it makes big sense for the credit card applicant to carefully read the terms of the agreement before accepting particular offer.
- Finally. It's very important that you skirt ATM machines when making a cash advance. Apart from all those payments your credit card company charges you, you will have to pay additional fee set up by owner of the ATM.
All these tips are meant to prove you that a cash advance is not the best way out when you are in need of extra money. You'd better have some savings at home and work hard on eliminating your credit card debt.
If you don't, cash advances will surely take you into a vicious spiral of credit card debt damaging your credit card history and eligibility for whatever credit card application you would want fill out.