Cash Advances and Credit Card Deals

May 25, 2007

Credit card deals are more than just the ability to get credit and use it. While the best credit card deals include incentives like a cash rebate or some other form of rewards program, the credit card still transcends this. Credit cards can have many aspects to them, some considered good and some bad. But ultimately, no single aspect of a credit card defines that card. Rather, a credit card is defined by the person that utilizes it, what they use it for and how they use it to fulfill that purpose.

Top credit card deals can bestow upon a person a credit card that can be used as a powerful weapon in their financial arsenal. Credit cards are convenient, easy to use and can allow a person the luxury of buying an object or hiring a service much sooner than they otherwise might be able to. The convenience combined with the credit extending aspects alone are enough to make someone very appreciative of having them, but some might argue that the ultimate weapon of a credit card is the ability of a person that signed good credit card deals to be able to use that credit card to get cash.

This is what is commonly referred to as a cash advance.

Cash Advances

Nowadays, most credit card companies are willing to lend their customers money and even without a great credit card deal, chances are you’re still eligible for a cash advance. These are payments made to you in cash that are counted against the balance on your credit card. For anyone that has needed to quickly go to their grocery store, participated in a pool at work or just simply wanted to take the family out for a nice day at the beach, the importance of having money over a credit card is quickly understood.

Cash advances allow you to swap your available credit for cold hard cash and have quickly become a popular transaction of credit card holders. Many companies have completed cash advance transactions in the hundreds of millions annually and some have actually lend out over a hundred billion dollars in a single year!

Now how’s that for popular?

Drawbacks of Cash Advances

Before you go and exchange your credit for cash, there are a few things you need to know. First and foremost, just as using credit is not getting free money; neither is exchanging that credit for a cash advance. In fact, the latter is probably worse than using credit cards directly in that regard, as most cash advances (unless you have one of a few really great credit card deals) cost money. That’s right, the credit card companies, ever greedy and on the lookout for more ways to suck money out of their customers, have stuck a fee onto exchanging your credit for cash.

This fee can be anywhere from a flat rate (very rarely seen anymore in the United States) of $2-$5 per advance all the way up to 3-5% of the amount being advanced (with a minimum fee of $5 regardless of whether or 3% is less than that).

Some companies will even take the next step and charge a higher interest rate for the cash advance and not apply payments to the cash advance until the rest of the credit card balance has been cleared. Combine those two facts and it becomes easy to see how easily cash advances can begin to seriously start eating into your credit and building up with interest.

It’s a sobering thought to be sure, but fear not. There are ways to manage your cash advances and following some simple guidelines will help you use your advances wisely and repay them on time.

Dealing with Cash Advances

Firstly, know your enemy! Know exactly how cash advances work for your particular credit card. You’re looking to acquire as much information as possible, but at the bare minimum you want to know the fees involved, the interest rates, whether or not you can pay your cash advance off before your other credit card debt and the grace period for repayments.

Once you know these four pieces of information, you’ll know how cash advance friendly your current credit card is. If it’s not too friendly to the credit/cash exchange, consider signing up for a great credit card deal that provides better cash advance support.

Once you know the details, it’s time to start planning. Take a moment to sit down and look over your finances and try to guess what you might need real paper cash for. If at all possible, you’d want to avoid cash advances due to all the fees and regulations involved, but if they are necessary the best thing you can do is plan well in advance when you are going to use them. This not only allows you to plan ahead and arrange your credit accordingly, but some credit card companies (especially ones pushing new credit card deals) are willing to do a periodical cash advance for a lower fee provided sufficient notice is given. Have a look and see if your company is one of these.

Last Word On Cash Advance Issue

Remember that cash advances are more expensive and ultimately in terms of finances very similar to your credit card. They are not free money and should not be treated as such. Use your cash advances with the same discipline and respect that you have for your normal credit card purchases and always make sure you know exactly what a cash advance entails before you take one.