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Taking Cash Advances on Credit Cards are a Bad Idea

 Why Cash Advances on Credit Cards are a Bad Idea

Getting a cash advance on credit can seem like a good way to get cash when you need it. However, this often isn’t the case. In fact, a credit card cash advance can be incredibly costly and it can even hurt your credit score.

How Cash Advances on Credit Cards Affect your Credit Score

ATM

When you get a cash advance, you’ll likely be charged a cash advance fee in order to borrow the money. You’ll also probably be charged an ATM fee from the bank whose machine you use to get the money.

Finally, you’ll be charged interest on the money you borrow, and there is no grace period, so you start paying interest as soon as you take out the loan. You’ll also need to remember that cash advance interest rates are typically very high (even higher than the interest rate on your credit card purchases.)

As you can imagine, all of these fees and charges add up very quickly. This can make it quite difficult to pay back the money you owe. The longer to take to pay back the loan, the more interest you’ll pay. This can quickly lead to financial problems.

Having a large debt for a long period of time can seriously impact your credit rating, making it very difficult for you to get a loan in the future. When a lender sees that you have a large amount of existing debt and recognizes that you are having difficulty paying the debt down, the lender will consider you a higher risk.

This means the lender will be more likely to reject your loan application or to raise the interest rate on any loan you get.

Also, having a large amount of debt at a high interest rate can very quickly send you into financial trouble and even bankruptcy. This will obviously mean that your credit score will be negatively affected.

Rather than using a credit card cash advance, it almost always makes more sense to turn to another type of loan when you need money.

Loans such as personal loans, lines of credit, home equity loans and car title loans almost always have lower interest rates and fewer (if any) other fees. Investigate these loans the next time you need money.

If you find yourself frequently turning to credit card cash advances in order to pay your bills or make ends meet, you’re likely on the road to financial trouble and you may need to speak with a financial counsellor to find a solution.

Related article: why are you better off by taking a personal loan rather than a credit card?

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