If you take out a cash advance on your credit card, you are potentially putting yourself up for risk for debt, since it can be very expensive. If you don’t repay it, you are asking for more expenses added onto the card. Before you swipe your credit card at the ATM, you should learn how to make good decisions when using a credit card cash advance.

Cash Advance Costs

All cash advances come with charges, usually ranging from one to four percent out of the total amount of the advance. Also, cash advances include higher interest rates than purchasing regular purchases. When using a credit card cash advance, you aren’t allowed a grace period; thus, interest charges begin as soon as you get your cash. The bank also charges you for using their ATM. Learning how to manage fees is essential.

Intelligent Ways to Implement a Cash Advance

1. Read all of the terms and conditions of your credit card agreement. Make sure you understand all the information, including the fine print, and if you don’t, contact a customer service representative to ask questions.
2. Only use a cash advance if you have a real emergency, such as unexpected medical bills. Normal life spending (i.e., groceries and gas) is not a reason to get a cash advance.
3. Stay within your cash advance limit, which could be less than your credit limit. If you exceed your cash advance limit, you will have additional charges at higher interest rates.
4. Only borrow how much you actually need. Don’t withdraw extra for spending money, because it will be harder to repay the cash advance with all of the finance charges. The higher the loan, the more you will have to repay.
5. Get a credit card that has a $0 balance. If you use a credit card that has multiple types of balances, such as purchases, cash advance, and balance transfer, payments are applied to the lowest balance of interest rate first. At the same time, your cash advance will become more expensive and harder to repay, because the balance continues to increase with finance charges.
6. Don’t overly use your credit card until you have repaid the cash advance. Don’t make credit card purchases until you know that you can afford them.

Alternatives to Cash Advances

If you are in need for urgent cash, there is usually a culprit of a larger money management problem, such as spending too much or not having an emergency fund. If this sounds like you, trying to repay a cash advance loan may take a lot longer and cost you a lot more money.

Below are some alternative you can do before choosing a cash advance:
1. Bank or credit union loan
2. Borrowing money from family or friends
3. Employer check advance
4. Extension due date from your creditors
5. Counseling on consumer credit
6. Local programs for emergency hardships from your human resource department

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