What is Cash advance from a credit card?
Generally, we use credit cards to buy our needs with money being taken as the credit by the banks, and we have to repay it. We don’t need to pay the interest amount if we return or credit the money back in a certain period. A less known feature of credit card is that you can get “Cash Advance” from your card in banks or at ATM’s.
It can be convenient when you are in urgent need of cash, but this service can be quite expensive.
How does credit card cash advance work?
Cash advance from credit cards can be explained, as when you take a loan of money from your credit card, but as Cash from the ATM. Your credit card has a limit up to which you can use it to buy products daily. A cash advance is a withdrawal of money from your credit card you do with debit but as a loan.
You can repay the advance when you pay your monthly credit payment, and here the service cost may vary. There is a limit to the withdrawal amount. For example, if your credit card value has a limit of $5000, you can avail cash loans of around $1500 to $2000 depending on your plan and banks.
You can withdraw money from an ATM or at the bank through a check, and this may need approval from the provider. You must pay the interest amount for the cash loan, along with your credit payment. It works as an instant loan from your credit card with a higher service rate.
Ways to get a cash advance from a credit card:
Banks have their cash advance limit and service charges according to their policies. You can get to know if you are eligible for a cash advance by reading your card’s policy. The details may include,
- Whether your card is eligible for a cash advance.
- By what means, you can withdraw money.
- Service fees involved in the transaction.
- The annual pay and the interest amount you need to pay.
Usually, banks provide the details about cash advance on credit cards on the first few pages of the card agreement. That includes how the cardholders can take a loan and the interest rates for that.
After knowing the eligibility criteria, you need to how much you can get from your account. For this, you can log in to your online account, and there you can find the limit. Again, different banks have different limits for their cash advance service.
You can take the cash loan through three simple steps. They are,
ATMs:
You can withdraw your loan amount through ATM as you do with debit card withdrawal. This service requires a separate ATM pin from your bank provider that needs to be entered when withdrawing.
Banks:
You can also withdraw your money directly by visiting your bank. All it requires is a photo ID of yours for identity proof and your credit card. You can fill up the paperwork, and once it is filled, you will get your loan.
Convenience Cheques:
It is like any regular cheque withdrawal service. Major banks provide cheques for cash withdrawal from a credit card. You can write a cheque for your product or service used, and the cheque will be valid under cash advance on credit cards. If you don’t have a convenience checkbook, you can apply for it at your bank.
Charges on credit card advance:
You will be charged up to 4% to 8% of your loan or a fixed amount, which is determined by the bank. Your interest period starts as soon as you withdraw your amount. There is no grace period allowed, and you shall be charged a finance charge for your transaction. It is always advisable to pay your loan and interest earlier than your monthly bill credit payment.
Are there any alternatives to credit card advance?
As we see, a cash advance can be used as your last hope when you need money. You can always opt for alternatives like,
- Personal Loans from your banks.
- Getting loans from other trusted sources like peer-to-peer transactions.
- Taking a small portion form your retirement plan or 401(k) loans.
- Getting help from friends and family.
Conclusion:
Cash advance from credit cards can be taken as an easy way to have cash, but it also the costliest way. You can always get help from other sources, and if nothing favors, you have a cash advance option.