The Many Benefits of a Cash Advance
A cash advance is a convenient financial solution, when you find yourself in dire need of quick cash to take care of your immediate needs. Its convenience emanates from the fact that, you are able to access funds, within the shortest time possible, without being subjected to the rigorous security checks and vetting; as is the case with banks and other financial institutions, when you need a loan. Some of the benefits include:
• The need for credit background checks and credit reports is eliminated.
• There is instant approval for funds if you qualify.
• Applications are secure and private.
• You have a freehand to use the cash as you wish.
• Repayments are automated.
• Money is disbursed into your account within the shortest time possible; often within hours.
However, you should avoid the allure of getting quick cash, by making sure that you only take this kind of loan when in an emergency or when in dire need of cash. This is advisable, if you are to avoid getting in to unnecessary debt. Just like with conventional loans, the fees and interest rates charged are considerably high for advances. In addition, the allure of obtaining cash quickly is bound to develop into a habit that will easily land you in debt, or ensure you do not get out of debt, if not properly checked.
Before applying, there are a number of factors that you need to take into consideration, namely; the fees, interest rates, credit limit, balance transfers, debts and the grace period.
Cash Advance – Points to Consider
• Fees
There are various kinds of fees that are charged to access the borrowed cash. The most common fee charged is the withdrawal fee. These fees vary greatly in the way they are charged or computed, from one provider to another. That is why you are always advised to carefully read the fine print, since the fees are cleverly concealed in the terms and conditions of the lending contract. The fees can be applied either as a flat rate or as a percentage of the cash amount borrowed. However, some lenders have devised a way of using both computation methods i.e. flat rate and percentage, in order to maximize their profits. Also, there are additional indirect finance charges that are incurred, even though they are not charged by the lenders. Examples of such fees are ATM withdrawal fees that are charged in order to access the money.
• Interest Charges
Interest charges are among the negative aspects of borrowing money. The interest charged for advances is relatively high, when compared to conventional rates for credit card purchases, and bank loans, due to the high risks associated with the lending model. Quick cash is likely to be charged interest rates as high as 25%, whereas normal credit card purchases and bank loans incur on average, interest charges of approximately 17%. Therefore, you must ensure that the interest that you are being charged to obtain an advance is not too exorbitant, and if it is the case, then you are better off looking for alternative sources of cash.
• Credit limits
Most people are oblivious of the fact that the credit limit of their credit cards is very different from the limit for cash advances. For this reason, it is important that you seek clarification from your credit card company, as to the amount of credit limit that you have at any given time, and the corresponding limit for cash advances that is applicable to you. Usually, the limit varies from 50% to 90% of your credit card limit.
• Balance transfers
Many credit card firms will lure you into using their credit cards, to pay off the balances on other credit cards; a process known as balance transfer. The offer is irresistible, since the interest rates on these offers are great. However, these offers only last for a fixed time, and once this period lapses, the balances thereof are treated in the same way as cash advances. You should therefore, be careful of such offers, since having such balances on your credit card and taking an advance at the same time, will surely land you in debt.
• Debt
If you are already in debt, getting a cash advance will only add on to the existing debt. As such, advances should only be taken when necessary. If you are trying to break the cycle of debt, it is crucial that you avoid getting cash advances for quick cash. This is because the availability of quick cash is bound to become a habit, which will only add increase your debt burden.
• Grace Period
The unfortunate thing about these loans is that there is not normally a grace period; meaning, finance charges start accruing immediately you receive the funds. In addition, interest must be charged for the accrued period, whether or not you pay back the money in full, as opposed to normal credit card purchases that are not charged any finance fees, if payment is made in full before the grace period lapses.
Final Remarks on Cash Advance
Generally, cash advances can be very beneficial, since they can bail you out in times of pressing financial needs. However, if misused, advances can cause very serious financial problems. As a precaution, you need to have a careful look at the terms and conditions of your credit card. Read the fine print and understand the various fees, interest rates and other finance charges that are applicable. Good luck in your pursuit of a cash advance!