How do cash advances from a credit card work?

What good is credit if it has no cash value? This is the principle of the cash advance feature on your credit card. You don’t have to simply use credit; you can actually convert that credit to cash. It seems as if we are always short on cash in day-to-day life. Everything we need requires some form of currency, from groceries to snacks to garage sale merchandise to gasoline. It’s hard to imagine a consumer not having some form of financial back up for emergency situations.

How the Process Works

If you have ever had a direct deposit account for your job then you know how convenient a system of cash withdrawal can be. The credit card cash advance feature allows you to use the credit card as a debit card at any ATM card system. You will be required to pay any fees associated with using this feature, as determined by your bank as well as the bank responsible for the ATM machine.

Another option in cash advance is to request a blank check online or in paper from your bank. Using this option online usually requires creating an online account. Some banks allow their customers to phone in an ATM pin, in the event that ATM withdrawal is impossible. If you choose this option however, the company will send you a new pin number for security reasons. Remember also that you can connect your credit card account to an online PayPal account and get cash advance that way.

A traditional credit card cash advance only applies to a consumer’s permitted credit limit. Understand though, that in most cases the amount of cash available for a single cash advance transaction is limited to a small percentage of their overall credit limit. Unlike a credit card, you cannot max out your entire limit using a cash advance withdrawal.

Credit cards with this feature slightly different from a debit card. With a debit card, you are taking out money that has already been deposited into the bank account. It is essentially a cash or check purchase. With a credit card, you are spending credit, and thus creating a bill to be paid later. Credit cards with cash advance options can be used for more withdrawal transactions than just an ATM withdrawal. Consumers can also withdrawal a credit card check or use the system for a gambling transaction.

What Cash Withdrawal From a Credit Account Costs You

The pros of a cash advance card are easy to see. It’s a convenient option, one that gives you total discretion over how you spend your money. There is no receipt for the purchases or no approval needed when you order cash advance.

Nevertheless, there are some cons to be aware of before experimenting with this feature. Consumers have to pay an unusually high APR rate for these cash advance options. Cash advance check or cash withdrawals is more expensive than typical credit card debt. The average APR on a cash advance purchase is 29.97%, when the typical cost of a credit card purchase is about 17.42%. That is an extra 12.5% of unnecessary debt.

There may be some circumstances in which getting cash advance money may be the most advantageous option. For instance, if the consumer still has an active credit card but has bad credit, disqualifying him or her from a personal loan. Bear in mind that cash advance withdrawals are not the same thing as a cash advance loan.

Cash advance payday loans are private companies that let consumers borrow money after the approval of an online application or an in-person application. These are loan companies that make judgment calls on individual loan cases based on credit, job and residential history. Some consumers believe that cash advance options from a credit card company and bank are actually cheaper than loans from a cash advance payday loan company. The only way to know for sure is to compare the interest rates between both companies.

One last point to keep in mind is that if you are trying to do a bank to bank transfer using a cash advance option, the entire process may take several days, as the bank will have to go through a process of deposit verification for security purposes. Make sure to request cash advance weeks in advance of your bill due date.

In conclusion, remember the essential pros and cons of withdrawal cashing straight from your credit card:

Pros and Cons of Cash Withdrawal

PROS

1. Cash advance money can be use to pay bills, cover emergency situations, or be lent to others.
2. Cash advance is available within minutes if you use an ATM card.
3. Cash advance has no obligation or record regarding how the money is spent.
4. Cash advance may be the only option if you have bad credit but have an open credit card.

CONS

1. Cash advance transactions carry high APR, even higher than credit card purchases.
2. Additional fees are slapped on for each transaction and perhaps by multiple banks.
3. Encourages impulse buying which could lead to greater debt.
4. Encourages long-term loans, since only a minimum payment is due.

If you are interested in applying for a cash advance loan then look up your bank on the web or apply for a credit card online. Use our credit card and bank comparison website to get a clearer idea of the APR you will be paying and make an informed decision! Start finding the best credit cards today!