Don't take that cash advance!

DavidBibby · #1 (**permalink**) 08-13-2010, 09:05 PM

If you've been thinking about getting a cash advance on your credit card.. might want to stop for a moment and consider what the costs are.

Let's say I want a $500 cash advance. How much is this going to cost me in all?

1) First, the upfront fee. Some creditors charge between 2% and 4% just for the privilege of loaning you money.

So that's a potential $20.00 right there down the toilet.

2) Second, creditors don't give you a 30 grace period on cash advances.. they start charging you interest from DAY 1. So if you're the type of person who pays the balance in full to avoid finances charges.... you're TOO LATE if you used a cash advance.

3) Third, the interest rates are HIGHER on cash advances (25% - 30%) then they are on regular purchases.. so not only do they stick you from DAY 1, but they REALLY stick you from DAY 1.

4) Fourth, most cash advances are done at ATM's so you get a fee from the ATM owner too.. So if the other three weren't bad enough... the bank providing the ATM has to get a piece too.

So.. the bottom line is.. avoid cash advances.

What's your cash advance horror story??

goodyphilips · #2 (**permalink**) 08-16-2010, 07:01 AM

well fortunately never had one, since some how stayed away from them. and after reading your post i think any body, including me, will think thrice before going for cash advance.

cjscully · #3 (**permalink**) 12-28-2010, 09:15 PM

Well, since someone revived this somewhat old thread I'll chime in with an opposing point of view.

When I consider the question of cash advances I go on the assumption that there is a dire financial need for the cash advance. I don't consider that a sensible person would take a cash advance just for the heck of it.

On that note, consider a circumstance where you have an emergency expense that exceeds whatever you have in your emergency fund (or maybe you don't have one). You need the funds now for whatever reason and you can't just charge the expense to the card (unusual these days but not too far fetched), what do you do?

Payday loan? Much more expensive and potentially problematic than a credit card cash advance.
Pawn something? Might be okay if you are certain you'll be able to pay off the loan and redeem the property. It's still riskier than the cash advance though.
Borrow from family member/friend? Might work but might also seriously strain your relationship with the person you borrow from if you can't pay it back as agreed for some reason.
Auto title loan? As bad as payday loans and pawnbrokers and is only an option of you have free and clear title to your car. Most people don't.

A credit card cash advance is clearly a better option than all of the above.

DavidBibby · #4 (**permalink**) 12-29-2010, 10:49 AM

Cjscully,

I agree with you.. under such circumstances, the Cash Advance is the least expensive and least risky among all the choices you outlined.

The sad truth is that people ARE using cash advances in a harmful way... not in an emergency situation, but for regular use despite the fact that credit cards are accepted virtually anywhere.

Thanks for your comments.. I like it when people chime in.

samwilson · #5 (**permalink**) 01-10-2011, 10:17 PM

Quote:

Originally Posted by cjscully

Borrow from family member/friend? Might work but might also seriously strain your relationship with the person you borrow from if you can't pay it back as agreed for some reason.

If it's a family/friend, and if you think they understand your situation, I think you should worry more about IF they could lend you money than "seriously strain our relationship with the person". I don't think a good friend/family member would get mad at you if you can't pay it back in time.

Well, unless you've borrowed a million, that's a different story.

Kidding aside, just make sure you don't take too long paying it back.

ralphegermain · #6 (**permalink**) 02-09-2011, 03:27 AM

Quote:

Originally Posted by DavidBibby

Cjscully,
The sad truth is that people ARE using cash advances in a harmful way... not in an emergency situation, but for regular use despite the fact that credit cards are accepted virtually anywhere.

As what has been mentioned, Cash Advance can be very useful and comes in handy IF or In an Emergency cases. But most credit card holders would just use them anytime they feel like. A night out drinks is not counted as emergency. Though many would think I am being crazy!

FinanceOcean · #7 (**permalink**) 03-05-2011, 09:23 AM

I agree that a cash advance can be expensive. I have seen some deals lately that might be helpful.

I was able to get an advance of a few thousand dollars to pay off the remainder of a home equity line that was coming due. The advance had an up-front rate of 4% and carried 0% interest for a year.

Since my only other choice was to finance other expenses with a credit card (at 12%) and I could pay off the balance in a year, it made sense.

I'm shocked by the lack of financing available compared to a few years back. I haven't had to use it much, and now that I could use it, it's seriously expensive.

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