A credit card cash advance is a service offered by credit card issuers that gives cardholders access to a portion of their credit line via cash withdrawal or, in some cases, a paper check provided by the issuer. The most common way to do a credit card cash advance is by making an ATM withdrawal. To do that, you will need to request a PIN from your card’s issuer.
How a Cash Advance Works
When you take out a cash advance, you basically get a short-term loan by your credit card issuer. There are several ways you can get a credit card cash advance, each of which requires different steps.
- From an ATM: To get a cash advance from an ATM, insert your credit card and enter your PIN. Choose the cash advance option and enter the amount you want to withdraw. If you don’t have a PIN yet, you’ll need to request one from your credit card company.
- At a bank branch: You can also get a credit card cash advance at a bank branch. You will need to present your credit card and a government-issued photo ID to the bank teller, and tell them how much money you wish to borrow.
- With a cash advance check: Your issuer may send you cash advance checks automatically or you may have to request one. You can write the check out to yourself or someone else and once it processes, the transaction will appear on your credit card statement.
Why Cash Advances Should Be Avoided
Credit card cash advances should be reserved for emergencies only, as they are very expensive. Cash advance fees tend to be around $10, depending on the credit card company. The current average cash advance APR is about 21%. Cash advances also don’t get any kind of grace period, so they immediately start accruing interest.
Alternatives to Cash Advances
If you find yourself in need of cash, you could avoid getting a cash advance by opting for some alternative options that have better terms.
- Borrow from family or friends: You can ask family or friends for a loan. This can be the most cost-effective way to get the cash you need. Just make sure you create a repayment plan.
- Apply for a personal loan: Personal loans usually offer better terms than a cash advance. You usually can pay back the loan at a fixed interest rate that’s much lower than the APR charged by credit card issuers.
When to Consider Getting a Cash Advance
Credit card cash advances should be avoided altogether, due to their high cost. However, a cash advance could be a reasonable option if you have an emergency need for money and limited resources for getting it. For example, a cash advance is usually a better option than a payday loan or a car title loan due to the exorbitant interest rates those loans typically carry.
Although our world has been moving toward a cash-less society, there are still times when you might need to pay for something with cash. For those instances, it’s best to use a debit card or a prepaid card that lets you make free cash withdrawals from ATMs, whenever possible.
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