How Does Cash Advance Work
Below is a MRR and PLR article in category Finance -> subcategory Wealth Building.
How Do Cash Advances Work?
Summary:
Cash advances are increasingly offered by credit card companies, but it's essential to exercise caution before using this service. Here are some key points to consider about cash advances.Understanding Cash Advances
Credit card companies often handle cash advances differently from regular purchases. A major concern is the interest rate, which is typically higher for cash advances than for purchases. Always verify the rate for a cash advance instead of assuming it’s the same as your usual purchase rate.
Accessing Cash Advances
Most credit cards allow cash advances via ATMs, while others might provide checks. Review your billing information to understand the process and check for any additional ATM fees.
Fees and Limits
Be aware that your card issuer may charge a cash advance fee on top of finance charges and ATM fees. Additionally, there are usually cash advance limits, either as a fixed dollar amount or a percentage of your credit limit. These limits serve to protect you and minimize losses if your card is stolen.
Payment Prioritization
Credit card companies often prioritize regular purchases over cash advances when payments are applied. This means that if you only make the minimum payment, the cash advance balance might not decrease and could even increase due to interest. It's crucial to understand how your payments are allocated, so review your cardholder agreement carefully.
Restrictions
There may be restrictions on cash advances, such as prohibiting electronic transfers to certain accounts like online gambling sites.
In conclusion, approach cash advances with caution. Thoroughly read your credit card agreement to understand the terms, fees, and payment applications. If the system seems unfavorable, it might be best to avoid using cash advances altogether.
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