For a person undergoing some financial distress, there are several funding options provided by banks or alternative lenders apart from conventional loans. One of these options includes a cash advance. This service is offered by charge card and credit card providers to allow cardholders to access cash either over the counter at a bank or through ATM withdrawal. However, most providers limit the amount of money forwarded to values lower than the borrower’s credit limit. These restrictions may be in the form of fixed rates, or a proportion of the loan amount.
It is crucial to note that in the U.S, the interest rate charged on cash advances ranges from 2% to 5% of the principal, plus additional fees. This means that the interest charged on a cash advance online against your credit card is higher than ordinary card transactions. There are also other transactions that are considered as cash advances. This includes the purchase of gaming chips, lottery tickets, and money orders.
One of the greatest advantages of cash advances is that it gives you access to quick cash even if your checking account has no funds available. Under the rules of credit schemes, a cardholder is to be issued with a cash advance over the counter provided that the borrower holds a card distributed by the institution and holds a valid piece of identification. This applies even if the cardholder is not able to present their PIN. Although this makes cash advances seem like a very convenient option, are there any other implications?
Understanding a Cash Advance Payday Loans Online
Certain situations need you to have hard cash in hand. But what do you do when your checking account is empty? Most people will opt for cash advances because they offer quick short-term solutions. However, as you enjoy the short-range benefits of this line of credit, it is important to consider the long-term implications. In the long-run, cash advances are quite expensive forms of credit. This is because:
- The interest on cash advances starts accruing on the same day of borrowing. What this means is that staying longer without paying it back will lead to higher repayments.
- As opposed to regular credit card transactions, the interest rate on cash advances is much greater.
This, therefore, means that in addition to the collection of expenses and fees charged on them, the high interest rate significantly contributes towards making cash advances more expensive. If you find yourself always relying on cash advances or other credit lines, you need to evaluate your financial situation and make changes where necessary.
payday cash advance loans
Before considering taking a cash advance, it is important to look at other options that will be less costly in the long-run. Although they are not ideal, they will save you from being buried under a mountain of debt. Among the most common options include borrowing money from a family member, applying for a traditional loan with a bank, overdrawing from your checking account, among others.
However, under the following situations, it is not recommended to take up a cash advance:
- For paying credit card debt and other bills
If you want to pay bills using this option, it will be very expensive. This is because it only increases the amount of debt, as well as the risk of getting trapped in a dangerous cycle of poverty and debt.
- Before declaring bankruptcy
Credit card transactions before declaring bankruptcy are legally considered as fraud. This is because you may take the advance with full knowledge of your financial situation and expect your debts to be forgiven. In this case, the creditor can challenge it and demand for payment.
Although taking up a online payday advance is not advisable in some cases, it can work for people in need of quick cash and have a properly laid out repayment plan that is not detrimental to their financial or emotional situation.