Sneaky Credit Card Trick #7 - High Cash Advance Fees & Rates

[This post is written and copyrighted by FIRE Finance (]

Sneaky Credit Card Trick #7 - High Cash Advance Fees & RatesCash is king when its not a debt but has been accumulated as a result of our savings. And like convenience checks, cash advances from our credit card accounts is a terrible mistake. We should avoid it at all costs.

What is sneaky about cash advances?

The rate for cash advances is much higher than the APRs charged to our credit card's balances. And there is no grace period. We start paying interest immediately.

Credit card companies charge a high fee for cash advances. It's usually 2 to 4 percent of the amount advanced. Akin to convenience check balances, our payments will be applied to our lower-interest balance before they are applied to our cash advance. So we end up with a huge pile of interest on our cash advance until our credit card's balance is first paid off!

Sneaky part is that this information is usually displayed on the back of the offers or monthly statements as fine print.

Reasons for charging high fees?

Most credit card companies cite a couple of reasons behind the high cash advance fees. The first being the fact that it's costlier to process cash transactions than regular credit card purchases. The other reason is the higher default rate among frequent cash-advance users. So our creditors decided to pass the higher costs and increased delinquency risk to the consumer!

Way(s) out?

Avoid, Period.

Image Source(s): iStockPhoto

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