August 16, 2022
Costly credit card cash advances

Considering a Costly Credit Card Cash Advance? Try These 5 Tricks First

What if you are in sudden need of cash? Be it for an emergency, paying a loan or paying your rent, emergency requirements of cash is a common occurrence that we all face at some points in our lives. When such a situation comes, you might as well consider going for the credit card cash advance option when you have no other ways! When you do that, the very first thing you must remember is: 

Credit Card Cash Advance Is Extremely Costly!

If you did not already know it, here’s how costly a credit card cash advance can be! Let’s say, you take an amount of $1000 as a credit card cash advance. According to general statistics, the average cash advance fee ranges somewhere around 5% while the interest rate on the principal amount is over 24%, which is almost 6% more than the interest rate charged on purchases with your credit card. The figures may vary a little up or down, but as it is evident that a credit card cash advance is really costly. 

How costly?

If the above example did not already answer that question, then for the $1000 you had taken as a credit card cash advance, the effective APR would be of 54% approximately. This means that if you pay the amount over a period of two months, you will have to pay an extra $90. That’s really disappointing! 

What You Need to Know about Credit Card Cash Advance

Credit Card Cash Advance

It is not unnatural to prefer credit card cash advance as a source of emergency funds as it is a quick source of money. But the problem lies in the huge costs that you will have to incur because of such a cash advance availed on your credit card! 

You must remember that the average cash advance APR is around 24.80%, which to be very honest, is pretty steep. Above that, almost all credit cards have a fixed cash advance rate, no matter how good the cardholder’s credit score may be. Only a few credit cards offer a range of cash advance rates based on the cardholder’s creditworthiness. 

Surveys and studies have shown that for regular credit card purchases, most of the credit cards charge a range of interest rates that depend upon the cardholder’s credit profile. Through this methodology of averaging the high and the low rate for each card, an APR of 19.84% was assumed for the 100 cards that were studied. 

Along with high-interest rates, here are a few other things that you must also know about credit card cash advances. 

  • Immediate Interest Charging

As soon as you take a credit card cash advance, the credit card company starts charging you interest on the amount of money you have borrowed. For almost all credit card purchases, you generally do not have to pay interest for several weeks if you had paid your due charges in full. For credit card cash advances, the interest starts accruing from the very day you take the money. 

  • Credit Card Cash Advance Fee

If you had not already heard enough bad news about credit card cash advances, then here’s one more. The survey mentioned above also showed that 96 out of the 100 cards surveyed, charge a cash advance fee. This amount is charged on top of the high-interest rate that you already have to pay as soon as you take the loan, as the interest begins accruing almost immediately. The cash advance fee is either $10 or 5%, whichever is higher.

5 Tricks to Avoid High Costs with Credit Card Cash Advance

All hope is not lost when it comes to less expensive cash advances! In this article, we have compiled a list of five simple yet effective tricks that can be really helpful in reducing costs for people who are considering a credit card cash advance! We know that we are living in difficult times, and with a crashing global economy due to the COVID-19 pandemic, needing emergency cash is something very natural! 

We have thought about it, researched the market, and took expert advice to formulate these five helpful tricks for people considering a credit card cash advance! With these tricks, you can get a loan or emergency cash for much less than credit card cash advances. You can even get an almost zero-cost cash advance, or even avoid taking a cash advance at all. 

1. Make Use of a Credit card to Pay Instead of a Cash Advance

Credit card to Pay Instead of a Cash Advance

When you take a cash advance, you are probably going to use the cash for a specific set of purposes. If you look well, you may probably find a range of ways to make payments with a credit card instead of paying cash. This way you can avoid the high charges on credit card cash advances as you have to pay a much lesser purchase-based interest rate instead of the cash advance rate and cash advance fees! 

For instance, let us say you are paying the rent with cash. In that case, here are a few solutions: 

  • Make use of a variety of platforms that enable you to pay rent with a credit card. The companies usually charge a service fee of 2.99%. 
  • Make arrangements with the landlord and send a check. 
  • Split the rent amount with your roommate/s and pay with two or three credit cards. 

If you are paying income tax or property taxes, then here’s what you can do: 

  • The IRS has a list of authorized companies permitted to process taxes on credit cards. Make sure you know about them and pay your taxes on a credit card instead of cash! These companies can help pay your annual tax bill or quarterly payments, even for businesses. The least charged fee is around 1.87%.
  • A few companies process property tax payments with credit cards. They charge a fee of around 2.5%. 

You can also pay tuition fees and bills with your credit card through different companies that provide such facilities. 

2. Try for a Balance Transfer to your Low-Interest or Zero Interest Credit card

Balance Transfer

Balance transfer or even a 0% introductory APR card can be a great option instead of considering a credit card cash advance. If you pay credit card balances on time every month, then you can go for this option instead of paying steep cash-advance fees and interest. 

Simply transfer an amount of balance to a low-interest or zero-interest credit card for a while and make use of the money you would have used to pay off the card. You can also make one with no transfer fee. A lot of companies offer periods of zero interest and no transfer fee.

3. Go Shopping with Friends

If borrowing money from a friend is not an option or possibility then you can go shopping with your friends and pay with your credit card, and let them give you the cash for it. This way, you can evade a credit card cash advance and avoid paying upfront cash advance fees and make use of the cash for your needs at a purchase-based interest rate. 

4. Get Prepaid Debit Cards with Gift Card Balances

Get Prepaid Debit cards with Gift card Balances

A lot of retailers offer debit gift cards on sale. For instance, OfficeGuy offers $30 off if you shop worth $300 with a VISA gift card. In general, two cards of $200 costs $206.95 (which includes a fee of $6.95). Now if you do the same three times, you will get $1200 approximately. You can easily turn it into cash through different measures. 

5. Opt for a Short-Term Loan From a low-Income Credit union Instead

Opt for a Short-Term Loan

Instead of making the costly move of taking a cash advance, joining a low-income credit union can be an economical option to avoid high-interest rates and cash advance fees. Most of these credit unions get federal low-income designations and the majority of the members have an income less than 80% of the median income for the respective metropolitan area. 

This option is preferable if your credit history is poor or if you do not have a credit history at all. You can also rebuild your credit score with such loans. You can easily find such credit unions, with the help of the Credit Union Locator tool offered by the National Credit Union Administration. Simply click on the name of the credit union you find and click on the link marked as “Research This Credit Union.” You can get to know if it belongs to the low-income designation from the details. 

Don’t Burn a Hole in Your Pocket

When you are in need of cash, a credit card cash advance or even a payday loan can be a tempting option. If you follow these tricks, you can avoid the high costs and cash advance fees and also recover the advance. There are a lot of options to explore and we have simply listed the five best alternatives or tricks to avoid expensive credit card cash advances! 

So, don’t burn a hole in your pocket and try these tricks instead, if you need money on an emergency basis!


One Comment

  1. Marry Walker Reply

    This article describes that how cash advances on a credit card work and what tricks you can apply to get lower interest rates. Nice article on this topic. Keep it up!

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