Cash Advance: Is It Really Worth The Convenience?

Cash advance sounds like a pretty good term, right? If you are out at a place where credit cards or debit cards are not a form of payment (which is not common, but can still happen at certain places), you do not have enough money in your bank account to pay for certain items, or you need money for an emergency, many credit cards will allow you to get a cash advance from an ATM or bank. This is convenient if you do not have enough money in your checking account since credit cards are not connected to your checking account. It seems like a cash advance is a pretty quick and convenient way to get cash on the spot in whatever situation calls for it, but is it really worth the convenience? Depending on your situation it can be, but more often than not, you should look for a loan in a different place.

It is important to know that most credit card companies will not allow you to take the entire cash advance amount out all at once. Usually, this amount is a few hundred dollars. So, if you have an emergency that calls for much more cash, there is no way that your cash advance from your credit card will cover it. Spending money on a credit card itself is like a loan; you will eventually have to pay that money back. Cash advances are a type of loan, too, just in the form of cash instead of swiping the card at a machine. You will still have to pay that amount back, with interest.

Getting a cash advance will allow you to start spending right away, which is great for people who need cash fast. What most people do not realize how much this will actually cost them in the end. When you take a cash advance, you will have a cash advance fee. This is usually 2%-5% of the amount you are taking out. For example, if you take out $300 with a 5% cash advance fee, you will actually be paying $315. This may not seem like a lot of money on top of the loan, but then there are ATM fees, which can also amount to a lot of money. On a $300 cash advance, you could end up paying close to $330 just to get the cash out, and these are not even all of the fees that you will have to pay.

 Cash advances actually have a much higher interest rate than the one on your regular credit card. Getting cash is more expensive than swiping a card. So, on top of the borrowing fees and the ATM fees, you will have to pay interest. The interest on cash advances also starts building the day that the cash advance is taken out. This means that the day you take out your cash, you will already be charged interest. Even if you pay back the loan in a reasonable amount of time, there still may be a huge interest cost on top of the loan itself.

Even though going to the ATM or bank and getting cash out quickly seems like the easiest and best way to get cash fast, you may be putting yourself in an expensive situation. You will end up paying more for this type of loan than any other type of loan out there because of the cash advance fees, ATM fees, and interest. You should look closely at the situation and see if getting this loan is worth it. If it is avoidable, then do not take it out. If you do need a loan, explore all of your other options before choosing this one. There are many other options that are less expensive and still convenient for you to use.