Credit Card eZine - News and Articles about Credit Cards

Cash Advances and Credit Card Deals

2007-05-10

Credit card deals are wonderful things that can serve to make our lives much easier because of their very presence and by virtue of their abilities. A person with a good credit card deal can use that credit card at many stores, which means that they don’t have to take a chance in carrying around cash that might potentially be lost or stolen.

If you lose $300 in cash, there is no way to get it back. If you lose your credit card, a simple call will get it cancelled and allow you to rest in ease knowing that because of your great credit card deal, you didn’t actually end up losing any money.

Nowadays, people are using their credit cards as all powerful tools from their financial arsenal. This is an acceptable usage of provided that the person is able to restrain themselves from making purchases that they can’t actually afford to make. If they do this, then they will most likely be carrying a balance at the end of the month and if they are carrying a balance at the end of the month they are in debt.

People in debt find it difficult to get out of debt and every successive month that they are in debt is a month that negative remarks are being put on their credit rating. More than one person with a good credit score has seen that score evaporate in the face of poor money management only to be replaced by poor credit that takes them years to fix. Don’t fall into this trap, because there is no easy way out of it.

In the modern day, people have more to fear than just impulse purchases from their good credit card deals; they have to fear cash advances. Yes, in a very surreptitious effort to get more money out of their customers, the average credit card company has made it extremely easy for their customers to get cash advances on their credit card deals.

A cash advance is simply just cash fronted to you by the credit card company and added to your monthly balance. On the face of it this seems like a pretty decent arrangement. After all, it’s just like making a purchase with your credit card except the only thing you’re purchasing is cash…right?

Well, yes and no. There are many times in a person’s life and many situations where they might prefer to have cash instead of credit cards. For example, if they are in line at a cafeteria, not only would a credit card take longer to process than cash, but there is the distinct possibility that the cafeteria might not even accept credit cards! If a person only has credit cards and no cash, where does this leave them? Very much out of luck, unfortunately.

Because of the desirability of cash over credit, many people have decided to take cash advances each month and just pay back whatever they don’t end up using at the end of the month. There are good points and bad points to this strategy, both of which are briefly outlined below.

Good Points

1. The extra cash around will most likely be very helpful; after all, cash is always going to be more convenient than credit card deals in most situations and therefore is more desirable to have
2. The increased activity, provided that they actually do pay off the balance each pay period, is likely to very positively affect a person’s credit rating since it involves them maxing out and then paying off their credit each month.

Bad Points

1. Credit card cash advances are going to cost money. Credit card company representatives love to charge their customers fees and the cash advance fee is usually at least a couple of dollars. This means that exchanging your credit for cash is going to cost you a lot of money in the long run, regardless of what you do, if you do it on a frequent basis.
2. More so than impulse purchasing, having cash around can be very dangerous if it counts against your credit. With impulse purchasing you can at least avoid it by avoiding stores but every day you are going to encounter dozens of scenarios where you can spend a few dollars in cash. These situations can quickly add up over time and not even the best credit card deals are going to save you if you spend your cash advance recklessly.
3. Cash advances, like everything else related to credit card company tactics and consumer balances are affected by interest. If you carry a balance with cash advances just as if you carry a balance with credit purchases, you are going to be affected by interest.

The way you deal with cash advances is the same way that you deal with credit card deals in general; you remain diligent and disciplined in their usage and in doing so allow yourself to experience the full range of positive benefits while minimizing the amount of negative drawbacks that affect you.

Plan Ahead: If you believe that you are going to need a cash advance, make sure that you plan things ahead of time. If your cash advance takes you over the credit limit, chances are the credit card company representative will put it through anyway and you will encounter a limit exceeding fee.

Be Responsible: Responsibility comes in more than one form. If you know that you lack the responsibility to spend a cash advance frugally and avoid random impulse purchases (which are much easier to do with cash than a credit card), then you can still be responsible and just simply not take out a cash advance. If you don’t need the cash, then there is simply no reason to take one out that is good enough to offset the risks of you squandering the cash advance.

All in all, just be smart about things. It’s interesting how everything involved with credit card deals seems to boil down to that one little fact, but it’s true. Be smart, and you will reap the rewards and avoid the risks.