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A credit card can be a great source of cash if you need it. Learn how to get a cash advance on a credit card and how to be smart with it here.
You use your credit card at the checkout and online, but did you know you can use it as a source of cash?
A credit card cash advance allows you to withdraw a percentage of your credit limit in cold, hard cash. You can get it from the teller at the bank that manages your credit card or request a PIN to hit the ATM.
However, getting a cash advance differs from swiping your credit card. If misused, it can transform your credit card from a helpful tool into a monthly nightmare.
Here’s what you need to know about how to get a cash advance on a credit card (and how to pay it back).
Can you get a credit card cash advance? Your credit card agreement spells out the answer.
If you don’t have the original agreement, log-in to your online banking portal and download it a second time. Can’t find it? Request a new copy from your bank.
Under the credit line section, you’ll see two numbers: your total credit line and your cash advance credit line.
If you have a cash advance credit line available, it will be a fraction of the total credit line.
Your cash advance line is part of your total credit line–not an addition to it. If you have a $500 cash advance line, but only $300 available on your entire credit card line, then you can only take out $300 in cash.
To access your credit line, you need access to your PIN.
You may do this one of two ways depending on your card provider. Most banks now allow you to do this online. However, other banks may require you to call customer service to request your PIN. Either way, your PIN will arrive in the mail.
No matter what credit card you have, you need to know that your cash withdrawal differs substantially from a typical swipe transaction.
Credit card cash advances usually come with two fees: an upfront transaction fee and an interest rate.
Let’s start with the transaction fee.
For the privilege of taking out cash, you will either pay a percentage of the transaction or a flat fee. You need to know what this fee is and factor it into your withdrawal. Not only is it one more item to pay back, but it will remove the remaining credit you may count on to do things like pay bills.
Most companies charge around 5 percent of the transaction or a fee of $10. The greater of the two applies based on the size of your withdrawal.
So if you take out $50, then your fee would be $2.50. But if you ask for $500 in cash, your payment is $25.
A credit card cash advance almost always comes with a higher interest rate than your total credit line. And if you are in an introductory period that offers a reduced or zero interest rate, then it likely doesn’t apply to your cash advance.
You might think that paying off the cash advance at the end of the month will save you the hassle of the higher APR. However, your credit card doesn’t work that way.
When you make a payment, you pay off the oldest balance first. To pay off your cash advance, you generally need to pay off your card balance in its entirety.
Plus, credit card companies typically start counting interest the day you take the cash out. If you take out a cash advance on the first day of your billing cycle, you will pay a month’s worth of interest if you don’t pay it off until your due date.
The final fee is the ATM fee.
If you use an American card, you already know that using an ATM outside your network comes with a fee between $2 and $10, depending on who owns the ATM.
If you use the ATM to withdraw your cash advance, keep the fee in mind when you calculate your balance and your budget.
The combination of all the fees and the interest means that a cash advance works best when borrowing a quick $40. Borrowing hundreds of dollar quickly adds up and puts you at a disadvantage from the day you borrow.
As a result, the best and safest way to use a cash advance is only to borrow what you can pay back after your next paycheck.
A cash advance isn’t a long-term loan or credit option. You need to pay it off fast–as in days, not weeks or months.
Paying it off quickly is the best way to avoid the combined high-interest rates, which turn your one-time need into a month’s long battle.
If you can, don’t wait until your next due date to pay it off. Do it as soon as feasibly possible to avoid growing your balance.
In some cases, a personal bank loan or collateral loan are better alternatives. Both of these loans offer a higher limit and fairer interest applications, which means it will take less time to pay off and cost you less in the long run.
Keep in mind that both these loans also include fees. However, the fee tends to be lower than that of a cash advance once you reach the higher figures. You can also avoid the ATM fees, which saves you at least a bit of cash.
Now you know how to get a cash advance on a credit card, but remember, it’s best suited for those who need to borrow $100–not $1,000. Borrowing large lump sums becomes expensive very quickly because the interest rate is not only high but the bank applies it immediately.
Do you need cash quick? Click here to learn about our financial products for all credit types.
43 million Americans have bad credit, with the bulk of these being young consumers.
While student loans and tough economic times can be blamed for this, poor planning and a low comprehension of credit facilities are partly to blame as well.
Cash advance loans are very convenient and can be hard to resist, but they can also put you in trouble.
How do these loans work, and how can you ensure to get the most out of them?
Here is an in-depth cash advance guide.
Your credit card lets you use your credit card to get a short term loan at an ATM or a bank. This is then paid back in the same way you pay for anything you put on your credit card.
In a way, this is like using your credit card to ‘purchase’ hard cash, which you then use to buy goods and services. In this way, you get to borrow cash against your credit card limit.
The same way you use your debit card to get cash from an ATM, you get cash from a credit card to be repaid with interest.
The difference between a credit card advance and a payday advance loan is that the latter is not dependent on your credit card.
If you typically do not carry paper money for your day to day spending, you might run into trouble when you need to pay for something at a business that only accepts cash payments.
In such cases, being allowed to convert your credit card limit into cash becomes very convenient.
Most credit card companies allow their clients to convert a percentage of their credit limit into cash, as opposed to the entire amount.
For most people, this translates into a couple of hundred dollars. This is therefore useful for smaller emergencies purchases and should not be dependent on for larger purchases.
While getting a credit card advance is easy, the interest rates can be a bit high.
Here are some of the associated costs that make it so:
These are determined by the financial institution that processes a transaction. This can be a bank or an ATM where you get your cash advance from.
If you use a bank outside your card issuer’s network, expect the fees to be higher.
These are determined by the company that issues your credit card.
These are charged in three different ways.
The first is by charging a percentage of the amount advanced. This can be as high as 5%.
The second way is by charging a flat fee per cash advance. For example, you can be charged $5 to $10 per advance, irrespective of the amount.
The third one is by charging the higher figure between the percentage or the minimum amount. An example of this is $5 or 10% of the withdrawal amount; whichever amount is higher.
To begin with, the interest charged on credit card loans is always higher than that charged on a credit card purchase.
Secondly, while you get a grace period with credit cash purchases, interest on cash advances starts accruing immediately.
It might be impossible to avoid this loan facility altogether.
For this reason, it’s key to know how to keep the costs low and avoid getting into unmanageable debt.
Here are a few tips.
The amount available for you to convert to cash is lower than your credit card limit. Exceeding this amount can result in higher interest rates and other over-limit charges.
Ensure to find out your card limit when you get a new card so you can adhere to a safe limit.
The key information to look out for is the one-off payable cash advance fee and the applicable APR as well.
If you are unclear on any terms of your contract, ensure to engage your service provider’s customer care representative.
Limit the use of this facility to emergencies you cannot use your credit cards on. It’s also important to create an emergency fund to draw from when needed.
If used without caution, credit card advances can spiral out of control making it difficult for you to make timely repayments. Consequently, this has the potential to lower your credit score.
Aside from only using this facility as a last result, limit your withdrawals to only what you need.
Resist the temptation to take out more because the higher you take, the higher the interest you will pay.
While this might seem like much, these amounts add up to a significant figure over time.
Taking out this facility does not directly impact your credit score, but it might have some indirect consequences.
The first one is that it raises your credit utilization ratio. This is among the benchmarks used to calculate your credit scoring. A high utilization ratio positions you as a high-risk borrower and may lower your scoring.
The other one is tied in with the costs of repaying a credit card advance. If you are not able to afford the high-interest rate, you may resort to late payments or even default.
When this information makes its way into the credit bureaus, it can negatively affect your scoring as well. As a rule of thumb, avoid making payments 30 days past the due date. Timely payment could help improve your credit score.
Ensure you understand all processing costs, the applicable APR and your ability to repay before taking out the loan.
16% of Americans have a credit score of below 579. This is the lowest level of the FICO score and is categorized as “very poor”.
A poor credit score can have a serious impact on your personal life and can affect your business negatively as well.
While no one can guarantee that you will hit an exceptional score, there are steps you can take to improve your credit score.
Here are seven tips to raise your credit score quickly.
The very first step to take is to get a copy of your credit card report. This is the only way to know where you stand before you figure out the specific actions to take to make things better.
This is, however, not all you will be doing with your report. Go through it carefully, checking for any error and omissions.
Look for things like a repaid debt that’s been listed as a default or a loan you repaid on time that is not listed.
If you identify any of these issues, move to have them corrected. This action in itself can add a few points to your rating.
You will be surprised at how helpful your creditors can be. Unfortunately, if you never ask, you will never find out.
If you are having trouble making payments, make contact with your credit card issuer and communicate this with them.
Most providers have temporary hardship programs you can take advantage of. The benefit of this is that you can have your repayment amounts reduced until you get back on your feet.
Smaller, more manageable installments mean you can pay a lot more comfortably. This is better than skipping payments and having a creditor send a negative report that sheds a few points off your score.
This is a great way of giving your credit score an immediate boost. This works particularly well if you are just starting out and have little information on your credit rating.
You do this by getting someone with a high credit card limit and an even greater repayment history. Their card issuer sends them a card with your name on it.
Legally, you are not obligated to make payments on any debt accrued on the card. But its usage reflects positively on your credit score.
The key is finding someone with above board transactions. In a sense, you inherit the person’s positive credit history.
However, not all credit card companies report authorized users. Before you get on it, do your research and find out if it will be reported.
It’s not uncommon to fall behind on payments from time to time. However, these small mistakes lower your credit score.
If you are in good standing with your creditors, it does not hurt to request them to delete some of the reported late payments. Financial institutions regularly communicate with Credit Referencing Bureaus, and all it would take is a quick phone call on your behalf.
If the request goes through, then you will have fewer negative reports, which will add some points to your credit rating. Nevertheless, try and restrict your late payments to 30 days. Creditors will not report late dues failing in this time frame.
If your issue is forgetfulness, rather than availability of funds, you can have your banker or employer make direct payments if this facility is available. If not, there are numerous software tools you can use to remind you when your payments are due.
You might be eager to forget about your car loan or student loan debts once you make the final payment.
However, as long as you completed your payments promptly, those records may help your scoring. The same is true for credit card debt.
All you need to do is keep these debts on your record. If they were entirely left out, then provide all the information to the credit Reference Bureau so they can use it to calculate your credit score.
Bad payment histories are deleted with time. However, bankruptcies stay on your report for 10 years and late payments for seven years. You don’t have much leeway with these.
Credit utilization is the amount of credit card balance you have compared to your credit limit.
This is the second largest factor affecting your credit score. The first is your credit repayment history.
The more credit you use on your credit card, the further down your credit rating drops. This trend indicates you are spending a significant portion of your income to repay debt, which makes you likelier to default on payments.
The best credit utilization is 0, which means your credit card limit is untouched. This defeats the purpose of applying for a credit card in the first place.
As a rule of thumb, keep your credit utilization ratio at 30%. This means using less than 30% of the credit limit availed to you. Anything above this can cause your rating to drop.
Under the FICO system, people with the highest scores have a utilization rate of 7%. The lower your utilization, the better.
The average age and number of accounts you have held are an important consideration in evaluating how you handle debt.
This tends to disadvantage people with a limited credit history.
UltraFico and Experian Boost allow people with limited credit histories to puff it up using other information.
Experian requires access to your online banking data and allows Credit Referencing Bureaus to add utility payments to your history.
In the same way, UltraFico allows you to give permissions for savings and checking accounts to be used alongside your report when calculating your credit score.
All in all, while it is possible to raise your credit score quickly, expect a few bumps along the way and allow yourself some time.
At First Financial, we understand that while you work on your credit rating you might still need help from time to time. No matter your credit score, we have a financing solution for you. Contact us today for more information.
Go from bad credit to good credit without beating yourself up
Can there be any joy in monitoring your finances? Your bank balance is disappointing more often than not. Trimming expenses doesn’t bring any joy. Reminders of irresponsibility can be a gut punch.
Still, a different mindset can help you make the changes to put you on the path to good credit.
Begin by forgiving yourself for financial mistakes
The shame and blame we heap upon ourselves for not being where we want to be financially can make our situations worse. It leads us to avoid confronting credit spending, recurring debits from bank accounts, balances on personal loans or car loans, and important conversations with family members.
Shame springs from an idea that the individual has departed from social norms. Start dismissing your shame when you understand that one in three others you’ll meet today also have credit under 601. That’s right—one-third of Americans today have bad credit.
The individual experiencing bad credit has lots of company. And is this all their fault? With aggressive companies relentlessly bombarding us with messages that we deserve their products and that we must keep up with our peers, it’s no wonder we overextend ourselves.
If you can grab your financial issues “by the horns” so to speak, you have made the first
step on the path to success. Some psychologists tell us that, “a willingness to endure discomfort and capitalize on challenge is a trademark among successful, fulfilled individuals.” While it will require a little effort, put a budget in place, inform those who may impact it, stick to it. You’ll quickly find positive feelings about yourself and your financial situation multiplying. As Benjamin Franklin told the framers of our constitution, “Once begun, half done.” Those quill pens got to writing, despite their enormous task.
Gamify Your Savings
Rather than tracking every $3 coffee, focus more on a positive indicator: your savings level. As that rises, set a reward after reaching certain amounts. The reward could be you get to buy a new piece of clothing or 10 shares of SnapChat stock. Set these levels up ahead of time and stick to these commitments. These rewards can offset the sense of loss from avoiding day-to-day overspending.
Take the pressure off when you avoid social media
First and foremost, understand that social media is simply carefully selected snippets of your friends’ and family members lives. What they choose to share is designed to elicit envy. Those of us here at First Financial are constantly surprised at friends’ life-is-so-great posts and how these compare to what we know are their real struggles.
What’s more, when you focus on others, you remove your attention from your own issues. If you have bad credit, all your attention needs paid to your spending and savings plans.
Let the social world turn without you when you use a religious tradition, mindfulness, meditation or good old smart reading to understand how pointless it is to compare yourself to friends, relatives.
Deepen Your Relationships when You Lay It All Out for Loved Ones
Serious conversations with loved ones can be intimidating, particularly when they’re about money. Strategize how to take the sting out of belt-tightening before you tackle it with those you love. In other words, have alternate plans to take the place of lavish habits so that your new financial regimen doesn’t translate as 100 percent loss.
First, explain how it’s important now to join forces for common goals and how these efforts will unite you. Emphasize that working together for financial fitness by cooking meals together, going to resale and thrift shops and competing for better money saving strategies will get you talking and sharing more. Also, make sure you include your family members’ long- and short-term goals in your planning. Study after study reveals that children and spouses prefer experiences and time spent together over material goods anyway. Shared experiences just connect us better and for longer than shared material consumption. Use that research if you have to!
Your new financial fitness system may benefit from gratitude journals. Everyone should jot down at least one thing they’re grateful for every day. Sharing is optional, but when these grateful moments that include others are shared, it strengthens bonds. These journals, particularly effective when an individual is feeling particularly short-changed, have proven to increase happiness significantly.
Because cash advance interest rates can start accruing on the first day, the borrower’s best strategy is paying the amount off as soon as possible. If that means two days, at least this loan is behind you. Thank it for:
Pay off the online cash advance fast by linking it with the checking account where your paycheck gets deposited. That way, the minute that paycheck goes in, the cash advance gets paid off. If you use your checking account as the hinge between your income and your loan, highest interest payments come out first. Borrowers can thank the CARD act of 2009 for that backup.
The second way to save on cash advance costs is to borrow as little as absolutely possible. With interest accruing daily, the smaller the amount, the less the interest.
Finally, if you don’t pay the cash advance off within days, you must pay it off on the date you initially agreed to. Rolling over a cash advance sets you up for additional fees on top of the interest rate you get charged daily. The worst situation to get into is if you’re only paying off the cash advance’s interest month after month. Have more questions? Get answers to the most common on our cash advance FAQ page.
Think you can manage a cash advance responsibly? Apply today!
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