Do You Need a Credit Card for Cash Advances?

A popular incentive offered by credit card companies is the ability to withdraw cash from your credit cards. There are two kinds of cash advances from credit card companies: one involves withdrawing cash from an ATM machine; the other requires cashing a special check you receive from your credit card company. Both types of credit card cash advances are added to your account balances and will decrease the amount of credit you have available for spending.

Although every credit card company is different, charging a higher APR for cash advances, as opposed to purchases, is a fairly common practice. Not all companies do this, but you need to review a company’s policy before using the cash advance feature. Also, bear in mind that you may also be charged a fee for each cash advance you receive. Generally the fee is based on a percentage of the amount you withdraw and has both a minimum and maximum dollar amount that can be assessed.

Important information about credit card cash advances

If your credit card balance includes regular purchases as well as cash advances, your monthly payment may not be credited to the entire balance. Credit card companies usually apply your payment to only the purchase portion of your balance until it is paid in full. Only then will they begin applying your payment to the higher-interest cash advances. This means that your cash advances, and the interest accruing on them, will not even begin to be paid down until the rest of your balance is paid off. Thus, cash advances can be an expensive way to get cash when you may be charged a high interest rate for a year or two before you are able to pay down your balances.

Benefits of cash advances from credit cards

The benefit of using the cash advance feature on a credit card is that you can get cash quickly when you need it and have no other options. Rather than going through the lengthy and sometimes difficult process of applying for a loan or additional credit card and not being certain if you’ll qualify, it’s an easy process to withdraw cash from your existing card. The key to making cash advances work for you is to use them sparingly and avoid carrying a balance either on purchases or on cash advances from one month to the next.