Most credit cards let you get a cash advance from your line of credit. Just go to any ATM and use your credit card like it's a debit card to get cash. This might seem like a good idea, but sometimes cash is easier to use than a credit card. In theory, it seems like it should be the same as buying goods for the same amount with your credit card. People who think this and use their cards to get cash advances are in for a big surprise, though.
In general, it's not a good idea to use your credit card to get a cash advance. As was already said, it seems like it should be the same as using your credit card to buy things, but what many people don't realise is that the rules for using your credit card to buy things and the rules for cash advances are completely different, and not in your favour. Before you even think about getting a cash advance, you should know everything there is to know about how they work and what the rules are.
First, and most importantly, the interest rates on a cash advance from your line of credit are different from the rates on your credit card balance. The interest rate on your cash advance will almost always be a lot higher than the interest rate on your card. The interest rates on cash advances vary a little from company to company, but most of the time, they are between 20% and 25%. Also, most credit cards charge a flat fee every time you get a cash advance, no matter how much you get. This means that your credit card company could charge you ten dollars just for using your card, no matter how much money you take out. A fee will also be charged by the company that owns the ATM you use to get your cash advance.
Even worse, most credit card companies don't give cash advances a grace period before interest starts to be charged. Usually, you have until the end of the month to pay off your balance before interest starts to be charged. If you get a cash advance, however, interest starts to be charged as soon as the ATM gives you your money. To make things even worse, many credit card companies won't let you put your payments toward the cash advance until you've paid off any balances on your card that aren't from cash advances. This means that you have to pay off the amount with the lower interest rate first, while the cash advance balance stays the same and the amount owed keeps going up because the interest rate is so high.
People often use this line of credit without even being aware of it. Credit card companies will often send you "credit card checks" in the mail. These checks are an easy way to get a big lump sum of money. Most people don't know that when they use these "checks," their credit card company will treat them like a cash advance, with all the problems that come with that.
Clearly, the costs of a cash advance on your credit card far outweigh any benefits you might get from it. People usually get cash advances when they are in the worst financial shape, which is also when they are least able to handle the high fees and interest rates. Don't get cash advances and put yourself in a lot of debt you can't pay back.
