There are credit cards that will offer a cash advance option. But how good a deal is this?
Well, the fact is that cash advances on credit cards are one of the poorest choices a customer can make.
Why?
The main issue is that every time you use your credit card to withdraw case, more fees kick in:
- Cash advances can carry an upfront fee of 2 percent to 4 percent of the amount advanced.
- The advances have a higher interest rate than regular card charges.
- Interest charges begin to mount as soon as the money comes out of the ATM.
- Many issuers also require you to pay down the balances for purchases before you pay down the higher-interest cash advance balance.
Here's an example of how these fees kick in:
Assume you bought a Blue Ray DVD for $500 on your card and then took out $50 bux in cash. although you pay the $50 back right away, you automatically lose your interest-free period because the credit provider deems you pay the cash back last.
As a result you will still owe the $50, but you will now only owe $450 on the $500 worth of purchases.
You'll continue to forfeit your interest-free period up until you have completely paid back the full $550. Any future purchases will still be ahead of the $50 in the payback line.
The moral of the story: Don't use your credit card to withdraw cash wherever possible. In the long run you'll save money!