When you receive a credit card in the mail, it will usually come with a list of terms and conditions that govern it. One of the things that you’ll notice is that you have the ability to get cash advances from your credit card. This might seem like a good thing, but it can actually lead you to a very rough financial spot.
The terms of the cash advance should clue most people in to the fact that it’s better to avoid using the service if possible. For the many things that you’d use a cash advance to purchase, you could simply pay with credit and avoid the additional charges and other fees.
Terms of a cash advance
A cash advance has terms that are much different than credit card purchases. Typically, a cash advance will have:
- A special fee that’s 3% to 5 % of the advance
- A higher annual percentage rate (APR) for interest
- No grace period on the charges
- Fees for ATM withdrawals or bank transactions
The impacts of the cash advance increase if you only make minimum payments on the amount each month. Still, there are some instances in which taking out a cash advance might be your sole option. Paying it off as quickly as possible is beneficial.
Anyone who’s drowning in credit card debt, including debt from cash advances, should explore their debt relief options. One of these is filing for bankruptcy so you have the opportunity to have a fresh financial start. Be sure to carefully review the type of bankruptcy you’re considering. Most consumers must determine whether they need a Chapter 13 or a Chapter 7 bankruptcy.
