Is a Cash Advance My Best Option?
If you have a credit card, chances are you have seen cash advance solicitations in the past. A credit card cash advance is a type of loan you can get through your provider. While generally easy to qualify for if you are currently a cardholder, this type of loan comes with some pretty high interest fees and associated usage charges. Perhaps this is the reason this borrowing method has fallen approximately 36 percent since 2010, according to industry analysts. Learn more about the pros and cons of the service before you proceed.
Beware of High Interest Charges and Fees
While the prospect of getting a loan using your credit card may seem convenient and beneficial, it is a good idea to take a minute to think about the costs associated with doing so. First, these services are offered at a higher financing cost than what is associated with your standard card balance. It is not uncommon for the service to be accompanied by an interest rate that is 7% higher than the APR (annual percentage rate) on everyday purchases. In other words, you could easily find yourself paying an interest rate of 22% for the convenience.
Next, most providers charge an additional fee on top of the high interest rate. A typical fee ranges from $10 to $20 per transaction. This latter point is very important to think about if you are planning on using this service on a semi-regular basis. As you can see, the fees begin to pile up, but that isn't the end. If you use an ATM machine outside of your banking network, you may be forced to pay another $2 to $5 in fees on top of the previously mentioned charges!
Furthermore, these transactions are not subject to the grace period of standard purchases. In other words, once a consumer receives the funds, interest starts accruing at that moment, unlike the interest on standard purchases that begins to accrue after the payment due date. Those with lackluster financial histories can expect even higher interest rates, some close to 40%! Some analysts point to the 2010 Credit CARD Act as the reason cash advances have become more expensive in the last couple years. The act makes it more difficult for lenders to penalize customers that default on what they owe. As a result, lenders raise rates and add fees to recoup lost revenue. Additionally, these services are subject to the same borrowing limits imposed on normal purchases. This means you will not be able to get funds upfront if they will cause you to hit the credit limit.
Intentional Overdrafts Come with Consequences
Many people do not use credit for various reasons and opt for a debit card or checkbook instead. Another type of cash advance that has become more prevalent lately is an intentional overdraft. In other words, consumers spend more than their available account balance using a debit card or check. Since overdraft fees have become increasingly regulated in the last several years, some customers believe the overdraft charge is a benign way to get fast cash. Unfortunately, this option isn't as viable as one might think at first glance. Since banks have less financial recourse when it comes to charging overdraft penalties, they may simply cancel the account of a repeat intentional overdraft offender. We urge you to weigh alternatives that won't put your financial portfolio at risk.
Viable Alternatives to Ponder
Although the aforementioned method may seem like a convenient way of getting cash, it is important to consider other types of short-term loans as well. Chances are you can find a product with competitive financing rates that are not based on your financial history. Those with past financial blemishes will greatly appreciate bad credit short-term loans for this very reason. Be sure to read the fine print associated with the specific type of short-term loan you are thinking about.
There is nothing scarier than when you are face-to-face with a situation you can't pay for. For example, a medical emergency or a car accident. Not everyone can turn to relatives or friends for financial assistance. We are happy to bring solutions to consumers with limited options. In order to qualify for financial relief, the two basic necessities you will need are evidence of employment and a bank account that is equipped with a direct deposit feature. The evidence of steady employment stands in as a form of credit-worthiness. Hence, there is no reason to go through a stringent qualification process in order to qualify.