A cash credit card can turn out to be a nightmare more than a utility if it is not used properly. With the added charges and interest rates, cash advances should be the last option for users to go ahead with. Ideally, the use of cash advances should be resorted to only when there are no options left.
Expensive Preposition: Cash Credit Card
Withdrawing cash from a cash credit card is not wise as it involves paying a lot more than the withdrawn amount. Every cash advance is subjected to a one time withdrawal fee that varies from 1% to 4%. Also, there is no grace period. This further means that the interest is levied from the first day itself.
Cash advances are also subjected to a higher interest rate than the purchase rates. So, they accrue a large amount with every passing day. Also, card users will need to pay the ATM withdrawal fee as well. All these fees make the actual amount bigger and harder to pay off.
Tips: Cash Credit Card
Cash advance, if used indiscreetly, can spoil a card user’s credit history. Hostile interest rates and default penalties can drain a card user. So, be careful about using cash advances.
Here are a few tips that can help you:
Read the terms and conditions: Read carefully and take your time to understand all the extra fees attached with cash advances. It is important for every cash credit card user to read the terms, understand it and contact customer service in case of any doubts.
Know your cards’ limit: There is an overage fee for withdrawing amounts bigger than the cash limit.
Pay bigger payments: Payments get applied, first, to the balances with lower interest rates. Therefore, if the credit card has a balance due to purchases or 'balance transfers,' the payments will apply to these balances first. Then, it will be applied to the cash advances. Thus, a small payment leaves the 'cash advances' untouched. It also keeps increasing due to the interest charges. You can either make bigger payments or avoid taking out cash advances unless there is no balance in the account.
A more effective plan of action would be to consider small loans that are offered at lower rates of interest than opt for cash advances through cash credit cards for bigger sums.