Cash Advances And Credit Card Checks - A Closer Look
Chances are you own numerous credit cards but you may not have
realized that they offer other methods of extending you credit.
One such alternative is the credit card check. Not commonly used
but it does have its place in certain circumstances. Another
commonly used method of extending credit offered by the credit
card companies is the cash advance.
Cash advances are simply industry speak for withdrawing cash
directly from your credit card, either to your bank account or
from a cash machine. However, both alternatives - credit card
checks and cash advances should only be used as a last resort.
The reasons are many and it's not feasible to delve into all the
details here but I have outlined a few of the most compelling
reasons below.
Much Higher Interest Most credit cards will charge you a much
higher interest rate on the money you borrow (the credit they
extend you) when you utilize either the credit card check or
cash advance options. Not only is the interest much higher but
it starts to accrue or be charged against from day one. In other
words, you often give up any interest-free period (which can be
up to two months), meaning that you start paying interest on the
money literally from the minute you spend the money. In
addition, most cards will also charge a fee each time you use
cash advances or credit card check and using an ATM may increase
the fee even further.
Signals A Need When selecting either option you are shouting to
all - especially the issuing credit card company that you are no
longer using your credit card for convenience but that you are
using the credit card checks or the cash advance out of
necessity. This sends a clear signal to them that you there's
really no reason to give their best deal or even a good deal but
that they can give you their worst deal because let's fact it...
the likelihood of you going anywhere in the near future is nil.
A Simple Idea Rather than using cash to pay for small things and
finding you have to take advances or use the credit card checks
to pay for bigger purchases, it's better to do it the other way
around. If you're in a situation where you're relying on
advances, you should start using your credit card to pay for all
of your everyday smaller purchases like groceries and gas and
then you'll be in position at the end of each month to put that
money to pay off the larger purchases and be in a better
position not to have to use cash advances and the checks in the
first place. Try being more strategic in how you spend.
Remember that there are very few bills now that must be paid for
by credit card check, so there are few reasons to ever use them
and if you're willing to call them up and wait in their queue
for a while, chances are that you can get them to accept a
credit card payment just by having the clerk read them number.
Beware of Cash Advance Limits If you find yourself relying on
cash advances, sooner or later you'll probably run into a cash
advance limit. The credit card companies don't advertise it, but
many of them have limits on how much of your balance can be cash
advances and how much must be in purchases. Try to find out
these limits before you start taking advances because if you go
over your preassigned limits then you'll incur fees and
penalties and loan shark type interest rates.
You Always Pay the Balances With the Highest Rate Last As you
pay back your credit card balances, most lenders will put your
payments towards the lowest-interest money (your purchases)
first and then towards other lending. Clearly, this means that
you keep paying the highest possible interest until you get your
balance paid in full.
The bottom line is this: Credit cards are a convenient source of
purchasing power and if used properly they represent a wise use
of credit. On the other hand, don't use the credit card check or
cash advance option unless you have too because these options
represent how not to use credit wisely. They are simply a
cleverly disguised marketing shell game used by the credit card
companies to extract additional fees and interest.
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