Pow!
Credit card advances can knock
you out.
When you're in a cash crunch, your credit card can conveniently help out with some quick cash at any ATM. But these cash advances also come with a very steep price tag.
First, there's the interest you'll be charged. Right now the average is 22%, according to the latest credit-card survey by Consumer Action, a consumer advocacy group. Cash advances may also carry steep fees, ranging between 2% and 5% of the amount borrowed, with no cap.
Suppose you take a $100 cash advance at a 24% APR. Let's assume your cash advance comes with a one-time fee of $10 (the minimum with most cards) and a $2.02 finance charge for the first month. Your annualized cost for that loan would come out to a whopping 144%!
Don't let cash-advance debt grow its own way.
Most credit cards use your monthly payments to pay down the balance that carries the lowest interest rate. That’s almost always your purchases balance. So until you completely pay off your purchases, your cash-advance debt will continue to grow. If you withdraw a cash advance, choose a credit card that's paid-off, and don't use it for purchases until you pay-off the cash advance.