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Credit Card Applications: Cash Advance Pitfalls

Credit cards are tricky things. They can be life-savers in emergency situations, and they can be very tempting to use even when they're not needed. This is especially the case when it comes to getting a credit card cash advance. Most major credit cards allow you the option to withdraw a certain amount of cash against your line of credit. While this can be just as easy as visiting an ATM, you have to question whether the fees and interest incurred are actually worth it. Here is a good rule of thumb: don't take out a credit card cash advance unless it's absolutely necessary, as in emergency situations. This method should be your last resort, as you'll end up paying quite a bit more than you're actually getting in cash.

Don't be fooled into thinking that cash advances are the same as simply using your credit card. While cash can be quite handy, you should always attempt to procure it interest-free, instead of through a credit card cash advance. Before you decide to get cash from your credit card, make sure you are fully informed as to the regulations attached to this service. First and foremost, the interest that applies to normal credit card purchases is usually not the same for cash advances--in fact, it's much higher. Rates vary slightly from creditor to creditor, but usually the interest rate on any cash advance will be between 20 and 25 percent. That's a lot of money!

Additionally, while some cards charge you two to four percent of the advance amount, most credit cards charge a flat fee for any cash you draw against your line of credit, regardless of the amount you take or how often you take it. In other words, it doesn't matter if youre taking out $20 or $300, your credit card company could be charging you ten dollars just for the privilege. There are also the ATM fees to account for. So, after taking into account the amount of the withdrawal itself, plus a $10 fee (this is just an example as fees vary), plus 25 percent interest, plus approximately $2 just for using the ATM, what is the total amount you're dishing out? If you are advanced $100, you are actually paying closer to $140!

Another downside to cash advances is that they carry no grace period. As soon as the ATM spits out that money, interest charges start stacking right up. Many creditors also require that you pay down the balances for actual credit card purchases before you pay down the higher-interest cash advance balance. Why? Because they make more money that way. You may think credit card companies are being sly, but all of this information is fully disclosed by law--you just have to take the time to read it. Believe me, it's better to know now than have it come as a shock to you later when your bill arrives.

If you're a current cardholder or planning to become one, you'd be doing yourself a favor to read all that pesky fine print that typically accompanies credit card applications and statements. This holds true for every aspect of your credit card plan. Clearly, the positive side of using a credit card cash advance is far outweighed by what it can potentially cost. Unfortunately, people typically resort to cash advances when they are financially insecure, which is also when they will be least able to handle the fees and high interest rates. So the next time you're diving into another one of those instant approval credit cards, remember that even the most enticing offers can come with smoke and mirrors.

Written by Kacy Suther. Get an instant approval credit card and other credit card offers for low interest credit cards. Credit card applications available online at credit-card-depot.com .

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