Things You Should Understand Before Opting For A Credit Card Cash Advance

Do you know that other than transferring the balance from another card or making a purchase, your credit card comes with the additional benefit of cash withdrawal It is one of the features of credit cards with the help of which holders can get instant hard cash But according to advisors, withdrawing money using credit is not a good option considering its extra charges. The charges can vary from 2%-3% with a minimum of Rs. 500 to Rs. 700 depending upon the card lender. The money withdrawn would be deducted from your credit limit instead of your saving accounts.

The cost involved in receiving a cash advance
Apart from the fixed charges, you would also have to pay interest on the cash withdrawn. Interest rates on these types of transactions are quite massive and separate. These withdrawals are charged daily interest until you pay the full amount of borrowed money.

In general, lenders can charge anywhere between 2.5% to 5% monthly. You need to understand that there is no interest-free period on these types of cash withdrawals. It means that you will have to pay the interest on the amount from the very first day. Interest rates vary from lender to lender can be as high as 48% per year.

If you cannot pay either minimum or full amount by the due date, late payment charges varying between 13% to 30% would be applied to the remaining balance. Paying this interest and the remaining amount can be very expensive. To reduce the cost of these types of transactions it is advised to pay off the outstanding balance as soon as possible. And it’s even better if you pay the whole amount before the due date.

A good alternative to opting for a cash advance
If used properly, credit cards come with many benefits like reward points, cash back, and many more. A cash advance does not come with any of these perks. Always read the terms and conditions to ensure that you know the hidden fees you will have to pay while taking the cash advance benefit. Given below are options you can choose to avoid cash withdrawal using a credit card.

1. Borrow money from your relatives:
Receiving money from your close friends or a member of your family is a good option. It would reduce your liability to pay for all the extra fees and interest.

2. Using your emergency savings:
If you have some savings, it is better to withdraw them now. These savings are a better option than paying huge interest on credit card cash advance.

Conclusion
There are many credit card benefits, and one of them is cash advance. But it comes with an extra cost. Since you have to pay interest from day one of cash advance transactions, the interest starts adding until the whole amount is paid off. So it is advised that you use it only when you need cash urgently and do not have any other option available at that time.

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