Cash Problems? Don’t Do This.

The convenience of a credit card cash advance might have you considering it. You might need cash for a certain expense, not have enough cash in your checking account, and think “Well I can just get some money from this ATM and pay it back.” It is that easy, but a cash advance from a credit card is usually not a smart move.

Here’s what you should know.

How Cash Advance Works

A cash advance allows you to get a small, short-term cash loan from a bank or ATM. It is counted as a deduction from your credit card and must be paid back. These loans are typically capped at a few hundred dollars.

Downsides

There are a few downsides to cash advances that you should know about. Here’s why a cash advance should only be a last resort:

• Fees. If you take a cash advance, your lender may hit you with cash advance fees. How much you pay depends on the credit card company. Some charge a flat fee, some charge a percentage of the advance. Check your credit card terms to see how much the fee would be. 
• ATM fees. On top of the fees from your credit card, you may also be charged fees at the ATM that processes the cash advance. Once again, how much you’ll pay depends on the ATM servicer’s terms. 
• Interest Charges. The interest rate that is charged on a cash advance can be quite high. Yes, much higher than your card’s current rate. Not only that, but the interest on a cash advance starts accumulating immediately. There is no grace period.

Do One Thing: Consider alternatives to a cash advance, as the downsides outweigh the convenience factor.