You probably have more than one credit card, but you might not have known that they offer other ways to give you credit. The credit card check is one alternative. It's not often used, but there are times when it makes sense. Cash advances are another way that credit card companies often use to give people more credit.
Cash advances are just a term used in the business world for taking cash directly from your credit card, either to your bank account or from an ATM. But neither credit card checks nor cash advances should be used unless you have no other choice. There are a lot of reasons, and I can't go into all of them here, but I'll list a few of the most important ones.
Much Higher Interest
When you use a credit card check or cash advance, most credit cards will charge you a much higher interest rate on the money you borrow (the credit they give you). Not only is the interest rate much higher, but it also starts to build up or be charged from the first day. In other words, you usually give up the interest-free period, which can last up to two months. This means that you have to start paying interest on the money as soon as you spend it. Also, most cards will charge you a fee every time you use a cash advance or a credit card check, and if you use an ATM, the fee may go up even more.
Tells Us We Need
When you choose either option, you're telling everyone, but especially the credit card company that gave you the card, that you're no longer using your credit card because it's easy, but because you need to. This makes it clear to them that they don't have to give you their best deal or even a good deal. Instead, they can give you their worst deal because, let's face it, you're not going anywhere soon.
A Simple Idea
It's better to do it the other way around than to pay for small things with cash and then have to take advances or use credit card checks to pay for bigger things. If you're relying on cash advances, you should start using your credit card to pay for smaller purchases like groceries and gas. Then, at the end of each month, you can use that money to pay off the bigger purchases so you don't have to use cash advances and checks in the first place. Try being smarter about how you spend your money.
Keep in mind that there aren't many bills that must be paid by credit card check anymore, so there's not much reason to use them. If you're willing to call and wait in line for a while, you can probably get them to accept a credit card payment just by having the clerk read them the number.
Watch out for limits on cash advances
If you depend on cash advances, you'll probably hit a cash advance limit sooner or later. Many credit card companies have limits on how much of your balance can be in cash advances and how much must be in purchases. They don't say this, but it's true. Try to find out what these limits are before you start taking out advances, because if you go over them, you'll have to pay fees, fines, and interest rates like those of loan sharks.
You always pay the highest rate balances last.
As you pay off your credit card balances, most lenders will put your payments first toward the money with the lowest interest rate, which is usually the money you spent. Obviously, this means that you have to keep paying the highest interest rate possible until you pay off your whole balance.
In the end, credit cards are a convenient way to get money to buy things, and if they are used right, they are a smart way to use credit. On the other hand, unless you have to, don't use the credit card check or cash advance option. These options show how not to use credit wisely. They are just a clever way for credit card companies to get more fees and interest by making it look like marketing.
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