Even though the money advance facility supplied by credit card companies is a convenient way of acquiring instant money at times of financial crisis, it must be avoided as far as attainable. The consumers must comprehend that money advances are accompanied by high rate of interest and costs. In addition, there are no grace periods provided for cash advances. Moreover, for customers who seek debt relief, money advance could add fuel to the fire. It would be much better to be aware of the following points prior to going ahead for a money advance through your credit card.
Though the charges for cash advance could differ, it is usually high. Two approaches of calculations are used for deciding the fee quantity. Largely it is calculated on a percentage basis, say 1% to 4%. Other card issuers directly ask for flat costs for their cash advances and it is usually continual not based on the quantity of advance. An additional frequent trend is to combine both methods of calculation. This is positive to outcome in larger charges. For example, an issuer could charge x% for cash advance, but charges a minimum $10 irrespective of the amount of advance taken. One more case could be an issuer who charges x% or $20 whichever is higher. In such a case, 1 ought to read the credit card agreement very carefully just before proceeding.
Another point to be noted is to stay away from usage of ATM machines for a cash advance. ATMs normally charge added fee for a cash advance. This fee goes to the financial institution to which that certain ATM belongs. The greatest loophole of a Cash advance is the interest charges. The rate of interest charged for a money advance by means of credit card is usually a number of instances larger than the interest rate for day-to-day obtain created through your credit cards. Another possible drawback of a money advance by means of credit card is the grace period and the mode of payment by the card issuer. A money advance does not involve any grace period, as it starts accumulating interest practically instantly on withdrawal of the amount. Therefore even if your credit card payment is completed, you may stilled be billed some finance charges for a cash advance. Lastly, most card issuers apply the method of payment of card purchases ahead of payment to money advance. In case such a balance is carried in a credit card, it could outcome in a high net interest rate.
Cardholders could get easily get tempted via cash advance delivers without having realizing the significant implications that it could later on leave on them.
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