Cash advances might seem like a great idea when you need money right now, but their true price won't hit home until after your visit to the ATM. Let's take a look at what to expect once the dollar bills start flowing.
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Credit card cash advances are fast and simple. When you're in a real pinch (like being stuck in a foreign country with no cash on hand) refilling your wallet is as simple as visiting an ATM. Cash Advances are very easy to obtain using a credit card. Just like withdrawing money from your bank account, right?
Read The Fine Print
Before you withdraw money from your credit card, read your card's terms and conditions. With most cards, expect to pay a typical ATM fees plus a service fee for getting a cash advance. These service fees can run as high as 5% of the amount withdrawn, so you're paying money just to use your own money.
5% of a thousand bucks is pocket change, right? Especially when you have a real crisis on your hands. But that 5% pales in comparison to the interest your credit card company tacks on to cash advances.Rates vary wildly (a select few cards don't even charge interest), but generally tend to be even higher than your card's interest rate. The worst part is that cash advance interest compounds the day of your withdrawal. You literally have no way to avoid paying the interest, that's why it's called a fee.
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So what's your total bill going to look like when all is said and done?
On a $1000 cash advance, you're facing perhaps a $50 service fee and possibly hundreds of dollars in day-one interest. Ask yourself, is it really worth it? Before you run to the ATM with your credit card, make sure you consider how much it will cost you in the long run.
The better option is to use your credit card and refrain from pulling out cash. In this day and age there are plenty of establishments who take plastic. If you encounter someone who only takes cash, we suggest finding a different place to spend your hard earned money!
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