Cash advance fees are charged when a credit card holder withdraws cash from an ATM, with fees ranging from 2-4%. Some credit card companies charge additional interest and do not offer grace periods on cash advances. Payments are often applied to purchases first, leading to increased interest for those carrying balances. Cash advances should only be used as a last resort for emergency needs.
A cash advance fee is a fee or charge that a credit card holder must pay when taking a cash advance from their credit card. For example, a person may have a credit line of $500 United States Dollars (USD) on their credit card. He could go out and buy goods or services with his credit card, or he could buy something online. If you were to use your card to spend $100 USD in a store, this would be considered a charge. However, if you went to an ATM and withdrew $100 USD, this would be considered a cash advance and you would be charged a fee.
Cash advance fees can be expensive. In many cases, a person will incur a two to four percent fee when receiving a cash advance. However, this is not all he is likely to pay for. Some credit card companies charge not only cash advance fees, but also additional interest when a cardholder accepts a cash advance. Also, many of the credit card companies that offer grace periods on purchases do not offer them on cash advances. This translates to paying cash advance fees and incurring considerable interest right away.
Some credit card companies do not set fees based only on a percentage of the cash advance. In some cases, an individual may be required to pay both a percentage of the cash advance and a flat fee. For example, you may be charged two percent of your cash advance and $15 USD no matter how much money you request. Other credit card companies may add a percentage or flat fee, charging the consumer the higher amount.
Credit card users should also learn how their credit card companies apply payments when considering a cash advance. Payments are often applied to purchases first and cash advances second. This may not be a problem for people who pay their bills in full each month, but those who carry balances may end up paying more in the long run due to increased interest when a balance is left over from month to month.
With such high cash advance fees and interest, it can be hard to understand why anyone would want to accept a cash advance. The fact is that they are tempting because they provide quick access to cash when a person needs it. They can be good for emergency needs, but many financial experts recommend considering them only as a last resort.
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