If you need cash in a hurry, and have a credit card, you might be tempted to use the ATM and your credit card for a cash advance. Its rather easy to break out the plastic and hit the ATM up when you need some fast cash. Yet these transactions can carry a hefty price.
Many people like to use this method for fast cash in a pinch because of how easy it is, and how quick it is. If you are stuck somewhere and need cash quickly, this method will do. It is as simple as hitting up an ATM. You would think it is the same thing as withdrawing money from your banks ATM, but nothing could be further from the truth.
The truth rests in your credit cards terms and conditions, or the fine print if you will. Before deciding on taking that cash advance you need to make sure you know what you are in for. On top of an ATM fee, with very few cards being excluded, you will face a service fee for that cash advance. This service fee may be upwards of 5 percent of the amount of the cash advance. This means paying a hefty fee just to use your own money.
While this 5 percent fee on top of the ATM fee might not sound to bad, especially if you are facing an emergency, that is not the only costs you will face. The interest rates that you will face will make that fee look like chump change, with most credit cards that is. There are a few select credit cards that do not charge extra interest, but these are few and far between. You likely will face interest rates that are far higher than your standard interest for purchases. Another catch 22 is that this interest compounds from the very day you withdraw the money, unlike when you use your credit card at the register for a purchase.
What does this boil down to? Well on a $1000 withdrawal, you are looking at about a $50 service fee. Then you are looking at several hundred dollars possibly in interest from day one. Most places take credit cards, so you would be better off just using your credit card at the register instead of doing a cash advance. If you run into a business that does not take cash, you need to ask yourself if it is really worth it before breaking out that credit card at the ATM.
If you are the type of person who needs cash advances, for example if you travel often overseas, there are options for you. These options however require excellent credit standing. If you have excellent credit you can obtain one of the few credit cards that do not charge extra interest or compounded interest from day one. These cards however are hard to come by, and the search for one may take some time, yet it would be wise to find one if you find yourself using cash advances often. Mind you that you will still have the service fee and ATM fee to deal with.