The Pitfalls of Using Your Credit Card for a Cash Advance

Using a cash advance is a popular method that many people utilize just to get by. When unexpected bills come up, sometimes a cash advance can help get you through the hard times. Many people use cash advance stores to get the money they need, but more and more people are turning to their credit cards for cash. A credit card cash advance allows you to access the cash you need at any ATM worldwide. You can swipe your card and access money immediately if you need it. While this can be very convenient when you are in a bind, it can also cause many problems for you down the road. Here are a few pitfalls of using your credit card for a cash advance. 

Overextension

The bad thing about credit cards is that they allow you to spend money that you do not have. In fact, they do not even care if you will have the money in the near future. You can get approved for a credit card in most cases with a credit limit of several thousand dollars. Then you can go out and buy anything that you want with it regardless of whether or not you can pay the bill.

The same principle applies to credit card cash advances. Now with this method, you can even buy things that you cannot get with a credit card. Many people take out money for cash advances and have no idea how they will repay the money. When you use this money on frivolous purchases, it can really come back to hurt you. It might seem very enjoyable and easy at the time. However, when the bill comes in the mail the next month, you could be astounded to see how much it is. Try to live within your means and use cash advances only for dire emergencies that cannot be avoided. 

Higher Interest

Another problem with credit card cash advances is the interest rate that is associated with them. Most people know that credit cards have a higher interest rate than most other forms of loans. However, many people do not realize that the rate for cash advances is actually higher than their normal rate. Therefore, if you have a special introductory rate on your card and you are expecting to take out a cash advance at the same rate, do not count on it. Most of the time, the cash advance rate will be quite a bit higher and end up costing you much more money in the long run. 

It will take you longer to pay off as they may not apply your payment to the highest interest rate first. In addition to that, the cash advance portion of your credit card may have a different limit. Therefore, you could be counting on the money from the cash advance and be in trouble when the money is no longer available. 


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