When you’re in a bind and need a little assistance, you might be able to qualify for a cash advance from your credit card provider. It’s a cash loan that’s made like a regular credit card purchase. The credit card cash advance will show up as a transaction on your statement and until you’ve paid it off in full, interest will build on the loan. In most cases, you won’t be granted a grace period. This means that you’ll begin accruing interest on your credit card cash advance straightaway. The interest rates are generally higher than the rate you’d accrue on top of common purchases. When you take all of these factors into account, you might wonder if it’s even worth your trouble. Before you decide to take out that credit card cash advance, you want to make sure you’ve weighed the total costs and restrictions: as well as any other options you might have.
Restrictions of Credit Card Advances
Each credit card provider has their own specific rules regarding the credit card cash advance. Generally, you’ll incur at least a three percent increase on the interest you’re made to pay back and that will vary. It’s also important to note that if you have several different balances on your card, your credit card provider will determine how your payments are to be applied. For example, if you’ve got a Chase Sapphire account, Chase will apply your minimum payments to the balance which holds the highest annual percentage rate (known as the “APR”).
- If you make payments above your minimum, Chase or any other credit card provider has the right to apply those payments however they see fit.
- Depending on which provider you have, you may be limited to a credit card cash advance that’s no more than a certain percentage of your credit limit.
Alternatives to the Credit Card Cash Advance
A credit card cash advance can be a very expensive way to get the money you need when you’re in a bind. Depending on your credit score and spending habits, you might be better off researching another way to get that quick cash in a hurry. There are definitely some other options out there for you and each option comes with its own upsides and downsides.
- Borrow from family or friends: It’s true for a lot of people that asking for help is extremely difficult. You might want to think about borrowing from your family or friends. See if a no interest or low interest rate can be worked out between you for a short term. Make sure there’s a formal agreement written out with clearly stated figures regarding total costs and the repayment plan so that everyone feels secure.
- Take from your 401(k): A large majority of 401(k) accounts allow for the borrowing of funds from one’s account. You’ll most likely be met with pretty decent interest rates that vary by employer. You can borrow as much as fifty percent (50%) of your balance or a maximum of fifty thousand dollars ($50,000) total. Your repayment will be expected in five years or less.
- Take from your Roth IRA account: This kind of retirement savings plan also allows for borrowing from one’s account and it has its own distinct set of rules.
- Apply for a personal loan from your bank: If you have at least good credit, there’s a fair chance that your personal loan application will be approved by your banking institution. You’ll generally pay less interest on these types of loans when compared to the credit card cash advance.
- Get a collateral loan: If you go with a collateral loan, you’re securing it with real assets. That usually results in more flexible credit requirements than unsecured loans. Your home’s value secures home equity loans and lines of credit.
- Get an advance from your employer: There are a number of employers out there that offer payroll advances at a low cost. This is a great option if you’ve considered a payday loan. You’ll generally find very low fees, but the interest rates might be the killer. In most cases, you can set up payments to come directly out of your paycheck.
- Peer-to-peer loans: You can borrow money from investors that want to help you out directly, whether you need a loan for a family emergency or a business venture. P2P loans generally have lower interest rates than banking institutions, higher approval rates and less constricting credit requirements.
- Payday or car title loans: You really want to consider a car title loan as a last resort. If you can’t pay back your loan in a certain amount of time, your vehicle can be sold off to cover your expenses. Both payday and title loans charge whopping amounts of interest–as much as three hundred percent (300%) or much more–and the average borrower has to renew their loan time and time again which only continues to drive costs up.