Money is a relentlessly circulating chunk of paper, which today is in your hand, and tomorrow can be in someone else’s. Don’t let money run your life, let money help you run your life better. And for your sake, you need to earn and save money for every thick and thin.
But life is demanding, and sometimes it doesn’t give us a moment to assemble ourselves or make plans; it goes on with its wicked unpredictability and fickleness. You can’t even foresee what’s gonna happen in the next few seconds.
Have you ever thought about what you will you do in case you don’t have enough savings to tackle emergency needs or a crisis? Hopefully anxiety and depression are not the solutions. You must gear yourself up with some smart possible alternatives.
Pondering what I meant by alternatives?
Problems cause us lots of angst but if you cope up with them wisely, they will vanish without any damage. And to handle certain situations, one option is to get a cash advance.
Let’s have a look at the term “Cash Advance” in detail.
What is a Cash Advance?
A cash advance is a short-term loan that can help you to tackle your sudden money needs. It is a service provided on your credit card by banks or private credit card issuers. It allows you to withdraw cash through an ATM, bank counter, or any other private financial agency.
You can withdraw up to a certain cash limit set by your lender. You have to pay an additional 3-5% fee on the actual amount being borrowed; it is a kind of interest that you pay in return of the cash advance.
If you take a cash advance on behalf of your credit card the interest on it is higher than other methods. The calculations of interest will start by the day you borrow the cash in advance.
What are the Types of Cash Advances?
There are mainly three types of cash advances, which differ from each other in regards to their terms and conditions. It depends on you, which form of a cash advance you select for your assistance. The types of cash advance are mentioned below:
1. Credit card cash advance
You can withdraw cash from an ATM by using your credit card. Through this way, you can get cash instantly to fulfill your immediate needs. Credit card cash advance withdraw limits are relatively less than your permitted purchase limit.
2. Installment loan cash advance
You can borrow money as an installment loan from banks, financial aid providing agencies and online money lenders.
3. Payday loan cash advance
It is a short-term loan in which you can get cash advance within a day, typically with an astronomically high interest rate.
Common Types of Cash Advance Transactions
There are eight common types of transactions that fit into the category of the cash advance:
- ATM withdraw
- Overdraft protection
- Prepaid cards
- Gifts purchase
- Online purchase
- Credit card checks
- Foreign currency purchase
- Gambling transactions
Pros of a Cash Advance
· Trouble-free access
You don’t need to pass through hard and fast rules and procedures; it is an easy way to get money.
· Instant delivery of cash
No need to wait for days to get loan approval, you only need to approach a lender who is willing to lend you money, then you have to fill the application and after few basic checks, the money will be transferred in your bank.
· Excellent expedient
You don’t need to head to the bank, wait in long lines for your turn or take an appointment. You can use an ATM or apply online.
· Super flexible
There is no restriction on how you utilize the borrowed amount. As in a typical loan application, lenders ask you to give an authentic reason for which money is borrowed as well as have you provide something as collateral. But this method is super easy and flexible.
Cons of a Cash Advance
· High charges
Cash advances carry very high interest rates, in addition to ATM dues and bank money transfer charges — sometimes foreign exchange rates also apply. There is also no grace period and you will be charged interest as soon as you withdraw money.
· Security issues
If you lose an issued cash advance, you can’t claim a dispute. The money is simply gone forever, and you still have to pay back the loan with high interest.
Does it Have a Link to Your Credit Score?
It’s a myth that cash advances will directly hurt your credit score upon getting one. It has no direct impact on your credit score, but indirectly, if tackled the wrong way, it may have an effect on your credit score.
If you take a cash advance, it will increase your credit utilization ratio on your credit card, which in turn could result in lower credit score. In other cases, as we have discussed earlier, cash advances come with high interest rates, and due to certain unfavorable circumstances, if you’re unable to pay back the borrowed cash advance payment, it will damage your credit score.
So it is always advisable to do your research before taking a step. In spite of some benefits, debt is debt. If you take it just to handle sudden needs, it’s a mediocre solution, but if you get habitual of fulfilling your luxury needs with a cash advance, you’re going to damage your financial status as well as your reputation. Be careful with cash advances.