Moolr.co.uk | Short term loans

Cash Advances Explained

Your credit card may provide the ability to perform a cash advance transaction. When you need cash from your credit card, you might think about using it. However, be aware that it is one of the most costly credit card transactions. Here is cash advances explained.

Advances Defined

A cash advance on your credit card is a sum of money you borrow against your credit limit. It’s essentially the same as using your debit card to withdraw money from an ATM. The exception is the money comes from your credit limit. This implies that you must repay it with interest. You can get a credit card advance by using your PIN at an ATM or a convenience check. Your credit card provider supplies this to you. Contact them should you require further details on how they work this.

You must not confuse these transactions with a payday loan that you would obtain from a payday loan lender. Lenders do not require a credit check for a payday loan. You must repay the payday lender directly, usually by your following payday.

Lenders bind your credit card advance to your credit card, and you can pay it off over time as long as you make minimum payments. If you have a balance on your credit card, your available advance limit may be smaller than your overall limit.

Cash Advances Explained – What Does It Cost?

Lenders attach a fee to cash advances and often contain higher interest rates than purchases. The creditor can charge a percentage of the loaned amount or a fixed rate. For example, your credit card company might charge you 5% of the advance amount or £10, whichever is bigger. Check your credit card terms to find out how much they charge you for cash advances.

Because such advances have no grace period, interest starts collecting on the sum as soon as the transaction is completed. Even if you pay your balance in full and start the billing cycle with a zero balance, this is true. Even if you pay your cash advance in full when your billing statement arrives, you will be charged a finance charge. Pay off a cash advance as quickly as possible to lower the amount of interest you pay, even if that means paying before your billing statement arrives.

When you use an ATM for a credit card cash advance, you will be charged an ATM fee in addition to the cash fee.

Cash Advances Explained – Paying Off Debt

These transactions’ cash balances are separate from your purchasing balance. Because the amounts have varying interest rates, your monthly payments are divided among them. If you merely make the minimum payment, your credit card issuer will likely apply it to the balance with the lowest interest rate.

Only extra payments will be applied to the balance with the highest interest rate, which is most likely your cash advance balance. If you have numerous balances, you will need to pay more than the minimum if you want to pay off your cash advance promptly.

It’s Not Always Real Cash

Even if you never physically withdraw cash from your credit card, some transactions are classified as cash advances. If your credit card has overdraft protection, for example, the overdraft amount will be treated as a cash advance. Cash advances include wire transfers, money orders, and cryptocurrency purchases made using your credit card. To find out whether transactions are considered cash advances, consult your credit card agreement.

  No Obligation Application