4 Things to Consider before Taking a Credit Card Cash Advance; Plus Some Alternatives – Business Insider
- April 24, 2020
- By: Greenpath Financial Wellness
Excerpt from Business Insider, featuring Jeremy Lark, Senior Manager of Client Services for GreenPath Financial Wellness.
The publication Business Insider featured insight from GreenPath Financial Wellness about the pitfalls of taking a cash advance from a credit card.
With record-breaking national unemployment claims, paying bills is a struggle for many. For those without emergency funds, many people are turning to other options to make ends meet.
The article outlines the pitfalls of taking a credit card cash advance, which is money you borrow from your credit card’s credit limit.
While a cash advance is quick and easy, it comes with very high interest fees – expect to pay an APR of 25% or higher, with no grace period before you start accruing interest.
Credit card cash advances can also affect your credit utilization, a major factor that determines your credit score.
The credit card issuer will likely charge you an additional fee (typically 3% to 5% of the total amount advanced, with a $10 minimum), he says. And if you use an ATM that isn’t affiliated with your credit card, you’ll rack up even more fees.
“We see many borrowers have the amount they owe on the card balloon substantially after a cash advance, eating into available credit and putting them at risk of additional fees and larger monthly payments,” says Jeremy Lark, senior manager of operations for GreenPath Financial Wellness, a provider of debt management and counseling.
As one option, see if you can get a personal loan through a credit union. Their interest rates are typically a bit lower. Says Lark, “Even a loan that is installment vs. compound interest like on a credit card can be a smart play if accessible and save quite a bit of money on interest in the long run.”
The bottom line: 99.9 percent of the time, getting a credit card cash advance is a bad idea.
Read the full Business Insider article.
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Jeremy Lark is dedicated to combating financial strife and stress through financial wellness, education, and technology. Through his work as Senior Manager of Client Services, he has helped GreenPath’s clients find the tools and resources they need to turn their lives around. Jeremy has been with GreenPath for 12 years, and while a born-and-bred Yooper, currently resides in the Detroit area.