Cash Advances for Unexpected Circumstances

A cash advance is a type of service that many credit card companies offer. Issuers charge a high interest rate, and there is no interest-free or grace period. This means that interest begins to accrue the moment cardholders withdraw money from their bank or through an ATM. The major benefit of cash advances is that it is easy to obtain one.

This service is intended for companies and individuals with fair credit who need cash to pay their bills or finance their operations. The amount offered depends on the borrower’s credit standing.

Cash Advance Explained

It is considered a type of currency loan. The frequency and maximum amount that you can borrow varies from one issuer to another. Check your credit line or credit card agreement. Issuers charge a cash advance fee, which is either in the form of a percentage or a flat fee. It is usually between 2 percent and 4 percent. Thus, if you withdraw $1,000, you will pay between $20 and $40 in fees. There is a limit on how much you can borrow. It may be a percentage of the available limit or it may be equal to it. Make sure that you stay within this limit because exceeding it results in a higher interest rate and overage charges.

While most hotels, retailers, and other businesses accept credit and debit cards, some vendors and stores accept only check or cash payments. This is where cash advances come handy. One option is to apply for a personal loan, but it may take weeks to get approved. Besides, borrowing a small amount is quite expensive. Another option is to apply for a payday loan, but the interest rates are often outrageous. A cash advance is a good alternative as it offers instant access to money during a cash emergency. At the same time, advances don’t come cheap, and the card issuer will assess interest and other finance charges. Beside the higher interest rate, the borrower’s monthly payment usually goes toward the lowest interest rate first. Thus the cardholder should pay the full balance as interest accrues immediately.

Alternatives to Cash Advances

Payday advance from your employer, pawning or selling household items, joining an emergency hardship program, and overdraft protection are considered alternatives. One idea is to open a bank account and use it as an emergency fund. Humanitarian organizations, non-government organizations, and local churches offer emergency assistance. Other options are to ask your creditor for a due date extension or to borrow from a friend or family member.

The term also refers to a cash advance loan extended to borrowers who need money to pay their utility bills, medical bills, car repairs, etc. Such loans are offered to people who are of legal age and have a steady job and an active savings or checking account. No credit check is required, and borrowers with tarnished credit meet the eligibility criteria. In some states and jurisdictions, cash advance or payday loans are illegal.

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