By now, hopefully, we are all aware that credit card companies are not your third parent, carefully watching over you, ready to step in at a moment’s notice and guide you carefully around the bottomless chasms of poor life choices. We know how tempting it is to use the plastic to pull a few extra greenbacks out of the ATM when you run short at the end of the month.
Here’s a tip – DON’T!
For various reasons, getting a cash advance on your credit card is even more of a financial trap than using it normally. There are two ways credit card companies figure out how much to gouge you for a cash advance. The first is to charge a percentage that normally ranges from 1% to 4%. The more you withdraw, the more you pay. The other method is to charge a flat fee, say $10. Get an advance of $10 or $100 and they still charge you the same.
Forward thinking companies have now realized they can combine both methods to profit from your terrible choice even more. See how nice they are? Another little nugget to tuck away in your brain is that the interest charged on a cash advance is normally higher than for simple credit transactions. If you usually pay 15% and decide to obtain a cash advance, they might very well jack the interest rate you pay on the withdrawal up to 25% or more.
The real message is this – almost ANY strategy would be better than a credit card cash advance. We wouldn’t suggest taking your roommate’s pet hamster to the local pawn shop but maybe it’s time to swallow a little pride and ask good old Uncle Buck for a small loan.
The Young Wealth Team