A Crash Course in Credit Card Cash Advances (1 of 3): The Basics

CCC The Basics

Tough times happen. When money gets tight, some people will turn to credit card cash advances to get by, but the dangers often far outweigh the benefits. Here’s everything you need to know to prep for a financial challenge.

Credit card cash advances can seem helpful because they’re fast, but you’ll often find that the long-term results are dangerous amounts of debt, mounting fees, and worsening spending habits. Protect your money and your credit by taking the OppLoans Crash Course in Credit Card Cash Advances.

What is a Credit Card Cash Advance?

People regularly use credit cards for daily purchases or big-ticket items like appliances, car repairs, or other big surprise expenses. Knowing how to use a credit card responsibly can provide you with options you might not normally have. For instance, say your computer crashes unexpectedly. You may not have enough cash on hand for a new one right now, but a credit card allows you to make that purchase and pay it off over time.

Making payments on time even helps build your credit score (resulting in a higher credit limit).

You can also use your credit card to withdraw cash. This is similar to taking out cash at the ATM or some retailers using a debit card, but the money doesn’t come from your checking account, it comes out of your credit limit–which is, technically, money you don’t have yet. Essentially, you’re taking out a short-term, small-dollar loan. This is a credit card cash advance.[1] It seems easy … almost too easy.

How Does It Work?

Well, it may seem obvious, but the first thing you’ll need to obtain a credit card cash advance is … a credit card (crazy, we know). There are a few different methods for obtaining a cash advance from your credit card provider. You can withdraw cash from an ATM the same way you would with a debit or check card. In order to do this, you’ll need to have a PIN number set up through the card provider. If you don’t have a PIN, you’ll need to contact the credit card company to set it up (read more in What You Should Know About Cash Advance Loans: An interview with financial expert Ann Logue).

You can also withdraw money from a bank teller. This may be wiser than using an ATM, as a bank teller can answer any questions you may have about the transaction and the fees. Some banks may even charge less for withdrawing money from a teller. Make sure to ask questions and know what fees and charges you’re agreeing to prior to receiving your advance.

Convenience checks can also be used to collect a cash advance. These are similar to standard checks, but they’re associated with your credit card account instead of your checking or savings account. Companies will occasionally mail these to customers along with special offers like 0% APR for a limited time.[2]

How Much Can You Get?

The amount you can withdraw will vary depending on several factors. First, it will depend on the cash advance limit set by your credit card company. It will also depend on your credit standing. If you have a low credit score, you may not be eligible for a high credit limit. With a good credit score, your credit limit for both purchase transactions and cash advances will be higher. Make sure you know your credit limit, because maxing out a credit card will negatively impact your credit score. Odds are you’re not going to get very much with a credit card cash advance. When you add up all the risks, the low advance amount often doesn’t make these risky maneuvers worth it. Learn more about the risks in The Hidden Dangers of Cash Advances.

The most important thing to remember is to ask questions. If you’re unclear about how something works or how much you should withdraw, even about whether you should even get a credit card cash advance at all—ask questions. Do your research and make sure that you’re making the best decision for your financial future.

True or False: Credit Card Cash Advances are a Risky Choice

This is an easy one. Borrowing against money you don’t have is always a gamble.

If you’re looking for a safer way to borrow, consider a personal installment loan from OppLoans. Our loans have longer terms (up to 36 months), more flexible repayment plans, and we report on-time repayments to build your credit. Click “Apply Online” below to get started today, and congrats on skipping that dangerous credit card cash advance. We knew you were too smart for that!

References:

[1]Konsko, Lindsay “What is A Cash Advance?”NerdWallet.com Accessed May 13, 2016.

[2]“What is a Credit Card Cash Advance?”ValuePenguin.com Accessed May 13, 2016.

The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through the OppLoans blog.