The Benefits of Using Your Credit Card for a Cash Advance

You may have the option of moving funds from your available credit into your checking account to provide a cash advance. This maneuver does come with risks. For example, you will likely be charged a fee to move the funds. You will then have to pay them back, plus interest. While there are obvious downsides to using a credit card for a cash advance, there are several benefits as well.

How to Use a Credit Card for a Cash Advance

This option is not open to all people holding credit cards. Some credit cards will restrict the option. The borrowers who will have most access to this option are those who hold a checking account and a credit account with the same bank. They will essentially be able to "transfer" some credit into their checking account by charging their credit card the equal fee. The bank will typically charge a high premium for this behavior. Since the bank knows only account holders in desperate situations will attempt this option, the bank takes advantage of the borrower's lack of options to exact higher fees than would otherwise be tolerable. The borrower later pays back the advance like normal credit card payments.

Obtain Immediate Liquidity

There are times when you will simply need cash. This can happen when you have an unexpected bill or even a delay in receiving anticipated paychecks. In some cases, you would be able to use the credit card itself to cover the gap in funds. Unfortunately, this is not possible with some transactions, like paying rent or transferring funds for child support. You need actual cash to make these payments, and credit cards do not replace actual cash. Obtaining a cash advance with your card will give you the liquidity to make the immediate payments without opening a new debt.

Provide for Basic Needs

It is always preferable to attempt to resolve debts through other options than a cash advance. For example, you may be able to gain an extension on your rent or utility bills while you await a paycheck. On the other hand, you will not have the same luxury when it comes to covering the very basic living expenses you have in a given month. If you are worried you may be evicted or face other severe penalties without the cash, using a cash advance can at least get you through the current emergency.

Avoid Costlier Options

The main benefit to using a cash advance through your credit card is it allows you to avoid other, costlier options. For example, the most common alternative would be going to a payday or cash advance lender. These individuals charge even higher rates than your credit card. They also will demand repayment in full in a very narrow time line. With a cash advance from your credit card, you will only be charged your standard interest rates. You will have the opportunity to pay your debt off over time instead of all at once. You will also see lower late payment fees if you cannot repay the loan right away.


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